Key points from Kaufman Bros. analyst Todd Mitchell’s recent note to clients:

[W]e are getting tired of what we believe is irrational exuberance about the Wii. Yes, it is popular, and yes, it is taking share, but one investor recently told us how he thought it would revolutionize the way Americans exercise…

As we highlighted in our Video Game Publishers: Valuation and Technical Analysis, published on 4/9/07, we are not sure the publishers will benefit from the Wii. Did the Wii really enlarge the market or did it just further segment it to Nintendo’s (NTDOY.PK) advantage? Most likely it is a little of both, so we feel the real questions is, did it enlarge the market by more than the amount of share Nintendo was able to take from the other publishers by dominating sales on the popular platform?

I dunno Toddy, I’ve seen a lot of elderly people and female gamers who would disagree with your point about expanding the market. And just in my immediate group of friends alone I can say that the Wii is the first console many of us have bought in roughly 10 years.

And the publishers that don’t make money on the Wii really only have themselves to blame. The install base is there (it grows by the hundreds of thousands month over month); the hardware is readily accessible given its simplicity; developers can table the exorbitant costs associated with making a 1080p game and focus entirely on game play; and the system is outselling the “industry leader” Sony by leaps and bounds. If third party players like EA can’t figure out the Wii, then there are plenty of other publishers out there who view the system as a fresh, new challenge that can.

Again, I say people like Mitchell can’t understand the success of something like the Wii — and therefore dismiss its success as a flash in the pan — because it is so disruptive and against the norm.