Cellphones and tablets have given people a nearly bottomless supply of games that typically cost a few dollars at most. Web and Facebook games are usually free, with the option to buy, say, a faster car or another virtual item that enhances the game. Industry veterans argue that you get what you pay for: mobile and Facebook games that are shallow entertainment experiences, compared with those of console games.
Mobile games are also instantly accessible online - and while it takes seconds to start a game on a smartphone or tablet, it can take minutes to get a console up and running after turning on all of the relevant equipment.
MOBILE games have hurt sales of dedicated portable game devices from Nintendo and Sony, but analysts and game executives say they don't think the threat stops there.
Mitch Lasky, a veteran industry executive and now a venture capitalist at Benchmark Capital, says he has walked into his living room, which is brimming with all the major game consoles, a library of new titles and a 60-inch plasma TV, only to find his children crowded around an iPhone playing Temple Run, an app-powered game available free.
"They were very much more interested in the immediacy of the mobile experience," says Mr. Lasky, who has funded several online games companies. "I'm looking at the $60 game the way I am a big-budget Hollywood movie. Yeah, I'm buying three or four a year - Call of Duty, Uncharted - but for the equivalent of television, I'm going to mobile platforms and free-to-play."
Mr. Fils-Aime says game developers can offer free games for the Wii U that generate revenue through the sale of virtual items. Sony, too, is allowing that approach with games for the PlayStation 3, and it is expected that Microsoft will more seriously embrace it as well.
It's likely that Nintendo will eventually face a more direct challenge in the living room from the same technology companies that have reshaped the mobile games business. Amazon, Apple and Google are all strong contenders to be in that camp, given their innovation track records. None have yet developed direct console competitors that have serious game-playing capabilities.
Still, Nintendo has overcome the odds before. Mr. Bach, the Microsoft ex-executive, says he doesn't underestimate the company. "I've learned not to count the Nintendo guys out," he says.