For years Nintendo’s Wii was the best selling current gen console on the market, and furthermore even we liked it. Mind you, we like graphics, that’s what we’re all about, but the standard def Wii still won our hearts, although Xbox 360 and PS3 consoles could manage 720p or 1080p.

However, the Wii has started lagging behind Sony and Microsoft, and analysts believe it all boils down to graphics. Nintendo executive Satoru Iwata confirmed that the Wii is not doing all that well.

"The Wii has stalled. Games of high demand could not be continuously released and the good mood has chilled," admitted Iwata. "The mood of the market got colder than expected, and there was a difference in expectations. Now, we are preparing for next year and thinking about what to do the year after next."

So, Nintendo is pondering what to do with its underpowered toy. The simplest course of action would be to cut prices, as the last $50 price cut simply wasn’t enough, and Redmond’s 360 is still cheaper and has more chutzpah.

The second alternative, or the road less traveled, is the introduction of a new Wii version with HD support, which should offer more freedom for developers and speed up porting for the platform. Unfortunately, it would also eat into Nintendo’s margins and it would probably be unable to compete with next generation Playstation and Xbox consoles.

More here.