How could they do this to me?

It wasn't Microsoft's audacious capture of Final Fantasy XIII; it wasn't the incomprehensibly inept handling of the Halo-reveal-that-never-was; nor was it Governor Perry's keynote address to a room practically overflowing with empty chairs, though all are good shouts in what was hardly a vintage year.

For me, the most significant moment of E3 2008 occurred during a roundtable interview with Nintendo's Shigeru Miyamoto. It was proposed to the great designer by one incredulous journalist that Wii Music, which he had demonstrated live during his company's conference, seemed more of a toy than a videogame. "Yes, that's right," replied Miyamoto. "And that's why it's more interesting than a videogame."

Tensions between Nintendo and the 'core' gaming audience have been simmering away for a while, as the Japanese giant's demands for a wider audience appear increasingly irreconcilable to veteran gamers' demands for more traditional fare.

The stand-off reached its apotheosis in the aftermath of the Nintendo press conference, and the fallout from it has exposed the uncomfortable growing pains of an entire industry. The forums predictably went nuclear. The intensity of the venomous indignation directed at the company has been quite something to behold, even amongst a community where tribal warfare is the mode du jour. More surprising, though, is to witness this reaction in certain journalists and industry personnel.

What had Nintendo done to enrage so many people? It "embarrassed itself", "betrayed" its fans and "disrespected" its traditions - all phrases swept around in the maelstrom, and significantly so - in its naked pursuit of the casual coin. Or, to put it another way, it didn't show off a new Mario or Zelda game.

The reaction can, in short, be expressed as: 'how could they do this to me?', and speaks volumes about the uniquely intense relationship Nintendo has with its fanbase. There is a peculiar emotional connection to Nintendo that one simply doesn't see with the other format holders, though their zealous champions are every bit as rabid.

It also affects the press, whose critical faculties have been seen visibly to melt in the evangelical hysteria of previous Nintendo conferences. One moment I shall never forget is the sight of an American journalist literally falling to his knees in wonder as Nintendo showed the first trailer of its more 'adult' new Zelda game. (The cartoony visual style of The Wind Waker was another one of those 'how could they do this to me?' moments). There was an unmistakable element of the religious about such occasions, where Microsoft and Sony events have been more sterile affairs in comparison.

But this year something changed. Or, rather, Nintendo moved on and expectations remained frozen in time, while the forum itself flirted with irrelevance. But since Nintendo has always actively encouraged devotion in its congregation (think Miyamoto leaping on stage brandishing Link's sword and shield), it's perhaps little wonder that some take any move that conflicts with their image of the 'real Nintendo' as a personal snub.

For these people, however, there are some inconvenient truths that need to be faced. According to the evolved Nintendo world view, the games industry has been stuck in what a psychologist might call a state of prolonged adolescence: lazy, navel-gazing, heel-dragging and ultimately reluctant to take the necessary steps towards maturity.

Nintendo, with DS and Wii, has done more than anyone else in recent years to shake the industry out of what it perceives as this torpor, and drag it kicking and screaming towards entertainment adulthood. The extreme reaction to this is, in these terms, pure teen angst.

Above all else, Nintendo's strategy, and its knock-on effect on the rest of the industry, is informed by certain economic realities. Nintendo president Saturo Iwata was one of the earliest figureheads to acknowledge that the industry could not grow simply through selling the same games to the same people.

Several years later the DS user base, as revealed during this year's conference, is now a virtual 50/50 split between the sexes. With the system well on course for 100 million units, that is a truly remarkable achievement and has transformed the gaming landscape.

Given Nintendo's current success, it's worth remembering its clumsy attempts, pre-DS, to fashion a successful strategy here – remember when plugging four dim-screened GBAs into a GameCube to play Pac-Man was apparently the future of home entertainment? And Sony, with its brilliant brand management of PlayStation, led the way in bringing gaming to new audiences in the mid-to-late nineties.

But it's Nintendo's strategy of innovation through interface, as well as a transformed, Apple-inspired design philosophy that has its rivals playing catch-up. It's now common knowledge that Sony has a motion-sensing successor to the disappointing Sixaxis in R&D, with rumours that Microsoft is attempting something similar. Likewise, Microsoft has been brazen in its adoption of Mii-like avatars.

Yet despite the overwhelming evidence to the contrary, friends, colleagues and forumites, who all watched the same conference as I did, came to the conclusion, variously, that Wii was "doomed", the line-up was "nothing but shovelware" and so on. One magazine journalist I know even updated his Facebook status to say that he "wishes to do the eulogy at the Wii's funeral".

These reactions can be explained by another useful concept: the process social psychologists call cognitive dissonance. This refers to the tension caused by holding two psychologically inconsistent thoughts or ideas at the same time. In this case, perhaps: "I love Nintendo games. Nintendo is sprawling platformers and epic adventures like Mario and Zelda"; and "I have no interest in these casual, gimmicky games and am uncomfortable with the encroachment of every Tom, Dick and Harry into my special interest area".

Our need to reduce this tension and achieve a state of 'consonance' is so strong that apparently incontrovertible facts can be ignored, spun and distorted in order to preserve the core belief. So, in the absence of a new Mario or Zelda, and with Miyamoto and friends shaming themselves on stage with invisible instruments, Wii must therefore be doomed.

There are other factors, of course. If you are a specialist magazine journalist with an audience made up primarily of 'core' loyalists and with an 'E3 Special' issue to fill, how many words can you bash out on a 'musical toy'?

So are the concerns, whatever the motivation, legitimate? To a point, I believe so. The success of Wii and DS, specifically the success of non-traditional, 'casual' software on the systems, has changed the dynamics of the market. Products like Brain Training, Nintendogs and Wii Fit are evergreen sellers in a way that more traditional titles like Zelda are simply not.

This is great for the business, but the flipside is the impact this has on third party development, evidenced by the torrent of low-cost, quick-turnaround, me-too brain and pet games flooding store shelves. Like it or not, this is a sign of a maturing market where every taste, however offensive it may be to a core gamer, is catered to. It's no different from the trashy airport novel, or the straight-to-DVD movie. One thing's for certain, the special club is over.

Once accepted as a fact of life, these products are easily ignored should you so wish. The concern is whether profits from them are then invested into churning out more of the same, or channelled into the development of big-budget, long-lead blockbusters. On that score, I don't see any immediate cause for panic. Ubisoft is a major purveyor of what a cynic might term 'shovelware' on Nintendo platforms; but it is equally investing massively in major productions like Assassin's Creed, Prince of Persia, Far Cry 2 and the newly announced I Am Alive. It has simply evolved to meet the needs of a broader market.

What's happening behind the scenes at Nintendo is less clear. Iwata cryptically confirmed during Nintendo's conference that the Mario and Zelda teams are working on new projects. But what does that mean? Given the number of copies, say, Legend of Zelda: The Twilight Princess shifted – despite effusive critical praise – versus something like Brain Training; or Super Mario Galaxy versus Mario & Sonic at the Olympic Games; is there enough of an incentive for Miyamoto and his team to spend up to five years on another epic?

Last year's appearance of Zelda on DS offers a possible clue: taking the familiar and much loved traits of the series and transforming the experience with the touch-screen interface.

But Nintendo needs to tread more carefully where its loyal fanbase is concerned. Iwata has previously commented that titles like Metroid and Mario were released early in the Wii's lifecycle to "satisfy and reassure" this fastidious group. Many of these self-same people saw little of satisfaction and reassurance this year. Animal Crossing was a welcome feature, of course, but sometimes you really have to wonder what goes through their minds. Why, for instance, wait until a roundtable interview to announce a new Pikmin game, when it could have been done to the satisfaction of gamers in under ten seconds of the conference?

Miyamoto's comments to one interviewer are revealing: "Our view of how we use E3 has changed. For a very long time, E3 was an event where - and certainly Nintendo included - catered specifically to the core gamer. Now we look at more...an opportunity for us to introduce new concepts and new types of play that we intend to bring to the broader audience, particularly because of the media that gathers at E3 now. "So while attending an E3 event like this, they might be given the impression that Nintendo is no longer focusing on the games that appeal to the core gamer, in fact we’re still working on many of those titles, but it’s just not the type of event where we’ll be showcasing that anymore." If E3 isn't the type of event for showcasing 'core' games, exactly what is it for? And someone obviously neglected to forward the memo to Microsoft and Sony. Did Nintendo not anticipate the negative reaction it would receive from gamers? Or did it simply decide on balance that it was worth it for the mass media exposure?

Either way, if I were Mr Iwata, I'd be having very serious think about whether I would bother with making a song and dance at E3 2009. The market has changed, Nintendo has changed, but E3 this year did not - could not - reflect that. It is simply no longer fit for purpose.

Frankly, I'd be amazed if Iwata, already a huge admirer of Steve Jobs, wasn't thinking seriously about moving Nintendo down the path towards laying on its own Apple-style press conferences whenever it has something major to announce. That has to be a better way of managing expectations than this year's event.

With Wii, ironically, Nintendo has almost gone full circle and finally realised its original ambition of the Famicom: the Family Computer. But the crossroads the company finds itself at is pulling it in two directions, between pleasing its fanbase and nurturing a new generation of admirers. It's not a situation you'd want to toy with.