Reggie Fils-Aime is sitting pretty. The president of Nintendo of America has the two hottest-selling game systems: the Nintendo Wii and the Nintendo DS. Today, he introduced the new DSi model, which has two digital cameras, music playback and flash memory storage. That model will likely widen Nintendo’s lead over second-place Sony in game portables. You can’t get a stronger hand than this as the crucial fall selling season approaches. Not so long ago, before the “Regginator” joined Nintendo in 2003, Nintendo was the underdog in the console war.

VB: How important is digital downloading to the new Nintendo DSi handheld?

RF-A: It’s a nice added business model but it’s not something that’s going to take over retail game sales. We’ll be able to see the sales growth and plan for it. But I guess similar to home consoles, the consumer will want an experience that’s best delivered through physical goods, simply because of the memory size required. There will always be those opportunities for big, in-depth games on retail products.

VB: You didn’t disclose the amount of flash memory that will be in the DSi model.

RF-A: And I won’t in this conversation. (Laughs).

VB: I suppose you wait for the best price you can get on the largest amount of memory and then drop it into the design at the last second.

RF-A: Exactly.

VB: Is that one of the harder decisions for a new model?

RF-A: On memory size? It is. It’s based on cost, performance, reliability. Those are a number of things that you touched on in your Xbox 360 article, in terms of how you create a hardware platform that really delivers against the consumer’s expectations of quality.

VB: You brought up our article on the Xbox 360 defects. How has Nintendo managed to escape the defect problem that Microsoft ran into?

RF-A: Simply put, we take product quality extremely seriously. We test our hardware and software extensively before putting it in the market. We have a very low tolerance for issues. When we do have them, our customer service personnel are extremely good at managing the consumer reactions. In the end, we don’t believe in launching any type of product if it isn’t perfect in our eyes.

VB: And that has turned out to be an advantage in this generation of consoles?

RF-A: It has turned out to be an advantage in this generation and past ones. The consumer perception of our product quality is high. We will only launch our products when they are perfect or nearly perfect.

VB: If that’s where you’re careful, where do you see Nintendo taking the most risks?

RF-A: We as a company take the most risks in pushing the boundaries on consumer expectations. [Think of] when Mr. (Satoru) Iwata (chief executive of Nintendo) held up the Wii remote and said this is the game controller of the future. Think of the day when we said the next handheld will have two screens, including a touch screen; it will have voice activation and all new types of games. Now we’ve said our handheld’s next iteration will have two cameras and sound that you can manipulate. That’s how we take our risks and push the boundaries of what defines a gaming experience.

VB: There’s always risk in how much inventory you decide to create. It looks, by the way you’ve set up the schedule for launching the Nintendo DSi in different territories, that you’re being careful to make sure Japan has enough units before you move to the U.S.

RF-A: In this case, that’s part of the reason. The other part is there’s an extremely high level