For the past five years, Nintendo has ruled the home console space, and it has led the handheld category for more than four times that long.
Now it's hoping to bring the best aspects of both fields together.
The company revealed its next-generation system Wii U at its 2011 E3 press conference, a device that will let players enjoy high-definition games at home and, in a limited fashion, on the go.
At the heart of the system is the controller, which will feature a 6.2-inch LCD screen that can double as a limited portable game system, a touch screen and an accelerometer. The system has been developed as a response to the growing popularity of tablet and smartphone devices.
The system is scheduled to launch in 2012, likely during the holiday period.
Nintendo hopes to appeal to both sides of the gaming world with Wii U. The pristine graphics could draw in core players, while the unique play elements of the controller might lure in a new audience.
"Some hardware is seen as only appropriate for the most passionate players," said Satoru Iwata, global president of Nintendo. "Others, like Wii, they say, seem to attract a large number of casual gamers.
"As an industry, what we haven't achieved yet is a game platform that is equally satisfying for all players. This is exactly what we intend to create with our new platform."
The system allows players to transfer games from the TV to the controller seamlessly, allowing families to share the living room rather than squabbling for control of the TV.
Nintendo showed several demos for the system and said it had a version of its hit "Super Smash Bros." in the works. The demos showed off the system's high definition capabilities as well as using the controller as a digital sketch pad, a video call system and web browser.
Gamewise, video demos show players able to "slide" video elements from the controller to the screen, with players using the touch screen to sling stars at targets on screen.
The system will allow Nintendo players to finally enjoy some of the high definition titles that have been the domain of Microsoft's Xbox 360 and Sony's PlayStation 3, including upcoming an "Assassin's Creed" title and Warner Bros.' "Batman: Arkham City".
Among the publishers who have pledged support are Electronic Arts , THQ and Sega.
"This is a better platform than we've ever been offered by Nintendo," said John Riccitiello, chief executive of Electronic Arts. "We can't wait to see EA games on this new system."
The fact that players will be able to transfer games from the TV to the controller might worry some investors, who could fear that offering a portable option so soon after introducing the 3DS, Nintendo risks dividing the portable market—and potentially cannibalizing sales of its existing handheld systems.
To help ease those fears, Nintendo emphasized the two systems are not meant to appeal to the same audience. "It was not designed to be a portable game machine even though it shares some characteristics," said Iwata.
The company also unveiled four high-profile 3DS games it is working on that will go on sale before the end of the year. Leading that charge is "Super Mario 3D" and "Mario Kart," two of the company's biggest franchises.
Also en route this year are a new "Star Fox" title and a remake of the NES classic "Kid Icarus."