Can An HD Wii 2 Turn Around Nintendo’s Video Fortunes?

Nintendo (s NTDOY) could announce the next generation of its Wii gaming console soon, according to comments made by EA Games Label President Frank Gibeau. Analysts believe that the company will announce the Wii2 at this year’s E3 conference in June, which could mean that it goes on sale early next year.

Any significant Wii update will have to include HD capabilities, which could help Nintendo to win back customers who use Microsoft’s (s MSFT) Xbox 360 or Sony’s (s SNE) PS3 as home entertainment devices. But will the addition of HD video streaming be too little, too late?

Gibeau told Industry Gamers today that Nintendo is “coming back with a second act,” adding: “They understand the dynamics and the fact that HD consoles is a booming part of business right now.”

Both the Xbox and the PS3 support HD, and both platforms have made use of it not just for gaming, but also for video delivery. The Xbox offers users of the Xbox Live marketplace access to Netflix and ESPN3, (s DIS) as well as video rentals directly from Microsoft. An addition of Hulu Plus is imminient. The PS3 also offers its own video rental store, plus rentals through Vudu (s WMT) and video subscriptions via Netflix and Hulu Plus. Both consoles also offer access to YouTube, (s GOOG) and Microsoft has been striking some additional content partnerships to bring shows like The Guild onto the Xbox.

Wii users can also access Netflix, but only in SD, with bitrates maxing out at around 700kbps — barely enough for a VHS-like experience. Content producers were initially very excited to bring video to the Wii, but hardware constraints and the growing popularity of alternatives — from connected TVs to dedicated streaming devices like the Roku player — has resulted in the Wii falling out of fashion. The BBC, which optimized its iPlayer for the Wii, reported earlier this year that only about two percent of the service’s users access it through the game console.

Just adding HD video may not be enough to convince potential customers that the Wii 2 will also be a great video entertainment device, especially in an age where Netflix is available on more than 250 devices. However, Nintendo could leverage the fact that game hardware release cycles are fairly slow. Microsoft and Sony are expected to stick with their current-generation hardware for at least two or three more years. So what could Nintendo add to the Wii 2 that would make it a home entertainment game changer?

One idea would be to solve the TV input problem that many connected devices are still struggling with. Nintendo could use a setup similar to the one introduced by Logitech’s Google TV set-top box, which daisy-chains HDMI devices to display both cable TV programming and its own content simultaneously on the same screen. Take this idea one step further, and you could think of dance or singing games taking place while related talent shows are being broadcast on TV.

Another angle would be to leverage some of the technology Nintendo is introducing with its new 3DS this month, like the Spotpass ability to engage in social games and exchange information with other 3DS owners just by passing them on the street. The Wii 2 could become the media hub extension of these kinds of near-field data echanges, for example automatically recommending videos based on the people you have met during the day, or even aggregating local news videos based on the places you have visited.

Granted, all of this may sound pretty futuristic — but so did the ability to play dance games without a controller just a few years ago. It’s clear that Nintendo will have to go all out if it wants to compete with Microsoft and Sony — and whatever the company comes up with, video will be a big part of it.

What kind of video features would you like to see become part of Nintendo’s Wii 2? Let us know in the comments!