I had a very lengthy reply typed up and it got eaten just as they switched the forum theme over(don't know if they did for the default scheme, but the 'classic' B3D color scheme has been updated, looking much nicer now although less like the classic B3D boards).
I'll summarize some points.
With just over a year on the market Nintendo has never had a console with the installed base of the GameCube. Not the N64, not the SNES and certainly not the NES. With just over a year on the market Nintendo has never had as many games available for one of their set top consoles. They have just under 200 games on the Cube right now, in its entire life the N64 never hit 300 in the US.
For every title sold on the Cube, Nintendo gets $10 they wouldn't if they were third party. With an installed base of ~10Million and a ~4.5:1 tie in rate Nintendo has gained $450Million dollars that they wouldn't have had if not for their being first party, and this after just over a year.
Nintendo has one of the best P/E ratios of any company involved in technology(actually by far the best from what I have seen). They are making truck loads of profits off of their current business model, to go along with their two strongest platform launches in their history, and the highest tie in rates they have ever had at comparable life cycle points. In terms of absolute profits, Nintendo is comparable to all of Sony. People should give pause and think about that last bit. All of Sony's electroncis, computers and PS2 combined are roughly even with Nintendo's gaming profits.
On to some specifics.
Johnny-
Nintendo is losing marketshare from the N64 at a rapid rate right now.
If this were true it would be a problem, but its not so it isn't. The N64 managed ~23% marketshare last generation, the Cube is at roughly that now and increasing steadily in the US and Japan(haven't seen full European numbers lately).
They need to do something about it IMO. If Mario, Starfox, and Metroid can't boost Cube past Xbox in US/EU than I don't think anything can, even Zelda.
Nintendo outselling MS is irrelevant when looking at if they are in trouble or not. The Cube is pulling down the same marketshare the N64 had and growing with the XBox seeing comparable numbers(also on the incline). Where do you think that markeshare is coming from? Nintendo being in third place with around ten million units sold has them on significantly better footing then a year after the NES launch when they were trying to reach the million unit mark and utterly dominated the market.
As far as boosting sales, Cube's marketshare spiked several percentage points last month, coinciding with the holiday season and the release of Metroid. As far as SarFox and Zelda, both of them were outsold last gen by MarioKart. As far as Mario is concerned, they should be right around three million units sold world wide as of now. Halo caliber sales in one third the time on market isn't doing too badly.
DVD: One third of US households have DVD players. That's pretty significant, but even if parents have DVD often times teens and young adults living at home want their own player. It hurts the Cube, but sometimes I think this effect is overstated.
DVD players have hit the sub $50 mark, quite a bit faster then I expected. I expect the DVD playback to become a larger factor next price cut with it becoming rather huge when the PS2 and Box hit $99.
Also, the longer that MS is in the market and with the purchase of Rare, Microsoft will be able to provide a more complete games lineup and broaden the appeal of the Xbox. I'm betting that MS does a better job at catering to the early teen crowd than Nintendo does at grabing the late teen crowd in 2003.
Based on what? For young teens I'm not seeing much in the pipe from MS. Blinx was supposed to give Mario a run for his money, look how that turned out.
More to the point though: Parents with young teens have realized that a PS2 with Ratchet and Clank, Jak & Dakster, and Sly Cooper, along with DVD playback, is just as appealing as a Gamecube with Mario, Starfox, and Metroid Prime.
If it was true that Nintendo's demographic were mainly young kids, then this could be a serious factor. Sony has been a major factor in the kids market for years now, look at their top ten for any month and you will find titles aimed at young kids. The only platform that has next to nothing of worth for younger gamers is the Box.
Sony has already successfully entered into the market with software that appeals to the outskirts (early teen) of Nintendo's core userbase. They better hope that Sony doesn't go even lower down the age tree with some decent offerings...
I don't think Nintendo is too worried. When you manage to have your best console launch ever with the highest tie in rates ever, I would assume you wouldn't be too worried about someone else offering titles that are direct competition to yours and sell a fraction, despite being on a platform with 5x the installed base.
Right now we are at ~70Million consoles sold for this gen with another 100Million-130Million being likely over the next few years. The battle is not, nor has it ever been, for second place in terms of MS and Nintendo. That is simply posturing for PR/fan purposes(although it is fun to 'keep score'). Both of them want the same thing, the largest installed base possible. Right now it appears that MS is taking marketshare away from Sony in the US and Europe more then anything, certainly not Nintendo. After just over a year Nin and MS are around 20Million consoles sold between them, 66% of what the N64 sold in its entire lifetime.
Where did you get that from? 
