You're dividing the market into the 'expanded audience', people who will buy a single game because it fulfills a specific need in their life, and 'gamers', who play video games because they have a "specific interest in gaming".
Yeah, I make that distinction because it's a
real actual distinction, and one that exists (to varying degrees) in almost all fields of commerce.
This distinction is based on a false premise. Everyone who buys a product, videogame or otherwise, buys said product because it helps them with a job they are trying to get done.
This is the economic equivalent of the "well actually
everything people do is motivated by selfishness when you drill down far enough!" argument in philosophy, and equivalently specious. Yes, on the most reductionist level, people buy things to fulfill needs. However, on the levels that actual behavior happen, those needs and their realizations vary wildly,
especially between goal-oriented needs and product-oriented needs.
This distinction is obvious if you look at any practical product that also features a luxury class. Most people buy cars situationally -- they decide (whether accurately or not) that a car is the most effective solution to the "obtain local transport" problem and invest in a practical device to solve it. People don't buy Lamborghinis situationally. There is no actual problem (except "I am rich as fuck but somehow don't own a Lamborghini yet") that a Lamborghini solves (for a private citizen, at least). It is a pure luxury good whose purpose is solely to be itself: it is a thing people want because of its fundamental nature, not because of what it's good at.
This effect is
way stronger in entertainment than it is in packaged goods because aesthetics are functionally divorced from practical considerations. Why does someone rush home every Tuesday night to watch a favorite TV show even when it's going through a rough patch? Or follow a specific favorite band on tour even though the setlist is the same every night? Or stand in line to get opening night tickets for a film that isn't even going to sell out? Is it because they calculate out the net entertainment per minute provided by these things and determine that it's maximal? No, it's because these people are fans of the individual things separate from their practical benefit. The entire concept of genre in every medium is basically predicated on this point -- that people are often more interested in the thing that is of the kind that they like than they are in the thing that is the most directly beneficial in addressing their specific "need."
I am not saying that all Wii Sports/Wii Fit/Brain Age customers will become die hard gamers over time. But the key to securing more purchases from these customers lies in using video games to serve their specific entertainment needs.
That's exactly it -- it is basically impossible to use video games to serve these people's entertainment needs
reliably, because
being a game is a neutral, not positive, quality of a product for this audience. If you don't care about games
qua games, Nintendo has no inherent advantage in targeting you compared to Apple, compared to Google, compared to Oprah, compared to any random jackass in the garage with $100, time to burn, and an idea for a great new web service or Facebook app. Nintendo is never going to hit it big with Financial Training (because of Mint.com) or Friend Miitup (because of Foursquare.) The next time they
do come up with a great idea that mixes game elements with practical benefits, their business model is still going to handicap them against people operating on cheaper, network-oriented platforms.
The only audience Nintendo has (and has ever had) that is immune to this kind of competition is the audience that cares about games
as a thing, the people for whom just the very fact that Mario Kart is a game and not a movie or a novel or a public-facing business downtown already makes it more fundamentally appealing. This has always been Nintendo's core audience, and any sustainable business model for them will always rely on appealing to this market.
(And this is entirely separate from the target-demographics argument. Nintendo is certainly good at picking up demographics -- kids, women, older people -- that are largely ignored by other publishers, and I certainly don't think they should move away from that.)
Nintendo's Blue Ocean strategy is simply based on finding job categories that have not been addressed, and designing games to target those needs. This is not a finite strategy.
Either one can interpret this in a meaninglessly vague way ("Nintendo's strategy is to make things people want" -- like, no shit) or you're drilling down enough on it that its limitations become obvious. What Nintendo has available to them is a business in which they can deliver to people discrete software products, sold in a retail context, at prices of $30+, and which require a piece of hardware that costs $100+, after a 1+ year production period. That's a model that has been
relentlessly assaulted over the last twenty years by disruptive technologies, to the degree that delivering games is pretty much the
only thing it's still good for.