Nintendo (PINK:NTDOY) shareholders are not happy. The company was trading close to $80 back in 2007. Now it’s trading below $18. The goose that laid golden eggs just three years ago is now laying stinkers. The company’s newest device — the glasses-free, stereoscopic, 3D portable gaming machine Nintendo 3DS — tanked so hard after releasing in March that the company had to cut its projections for the next fiscal year from around $1.3 billion to just above $260 million.

Now investors want Nintendo to give up the video game machine business entirely and focus on profiting off its popular game franchises like Super Mario Bros. and Pokemon by publishing on other machines. According to a report at Bloomberg, those investors want Nintendo on Apple‘s (NASDAQ:AAPL) iPhone and iPad, and they want it now.

Apple and Nintendo have been dancing around one another for the past decade. At the beginning of the ’00s, Nintendo had a lock on the youth-targeted portable electronics market with its Game Boy portable game player. By 2005, Apple had overcome its 20-year history as a perpetual runner-up thanks to the sleek, useful iPod, and it was the fifth generation of that device that saw Apple start to pursue portable gaming. At the same time, Nintendo was making waves with its Game Boy successor, the touchscreen-equipped Nintendo DS.

It was in 2006 when Nintendo released the new model, the streamlined Nintendo DS Lite and the motion control-based home console the Nintendo Wii — both of which borrowed liberally from the clean, simple design of Apple’s products — that Nintendo’s business started to boom. Apple escalated the growing cold war in 2007 with the iPod Touch and iPhone, devices that not only replicated both the Nintendo DS’ touch interface and the Wii’s motion controls, but offered games through the App Store at a mere fraction of the price.

In 2011, Apple is selling around 9 million iPads per quarter. Nintendo has released a 3D-based handheld that consumers are ignoring, and it announced a new home console called the WiiU, a device whose controller is a truncated tablet computer. No wonder shareholders are pressuring Nintendo to bring its wares to the competition; from this vantage, Apple has pulled ahead by so wide a margin it’s impossible to catch up.

It never will happen. Nintendo is arguably more protective of its intellectual property than Apple, and it has refused to license any of its franchise characters to other companies since its ill-fated partnership with Philips (NYSE:PHG) back in the early ’90s. Still, unless the company wants to watch its market cap dip below $20 billion, something needs to change.

Nintendo’s woes at this point in time have less to do with needing to bring Mario, The Legend of Zelda and Pokemon to the iPhone and Google (NASDAQ:GOOG) Android devices and more to do with needing to dramatically redefine its business model. As long as Nintendo insists on focusing on retail products like the upcoming Super Mario 3D Land that cost $40 or more and feature little to no online functionality, it is going to watch its profits disappear to 99-cent powerhouses like Rovio’s ubiquitous Angry Birds. Nintendo’s digital download business also is a joke. The company charges $5 to download a 25-year-old Zelda game. Meanwhile, the audience for that game can purchase a modern, comparable title on the App Store for 99-cents, and it will include Facebook functionality so they can compare their progress with friends.

Nintendo found success by imitating Apple, and vice versa. Nintendo needs to do more than mimic Apple’s design now. It has to borrow its entire content business model or risk disappearing from the market completely.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.