Eclectic Dreck said:
The Wii and most of the games on the system might be "garbage", but then again, the vast majority of the games on any system are garbage.
Nintendo isn't stupid. They're the oldest competitor in the race and they have seen the fall of more than one console line. The gamecube was something of a disaster but the DS and the WII have sold tremendously well. And, the neat part is Nintendo actually makes money off the hardware - something that neither sony nor (especially) microsoft can't claim.
The only real advantages Sony and Microsoft have is the simple fact that they are giant corporations with a great many sources of revenue. They can afford to hemorrhage cash, at least for awhile. But when the best they can do is present consoles at price points people don't really want to play, or hardware with an abhorrent failure rate, it doesn't take much to see that Nintendo is, at the very least, doing far better than anyone expected at this point.
Sony's advantage is that they know how to do media and hardware. They're generally going to have the edge among media oriented purchasers, and as you noted, they have enough revenue to keep things going for a while, though the price drop in Blu-Ray players is going to necessitate a PS3 price drop this year.
Microsoft's advantage is that they own the most popular PC platform, they publish the development environments for both the PC and the 360, and they make the barrier to entry for developers insanely low. This, I feel, will give Microsoft the edge in library titles for a long time to come. Sony may actually start following Microsoft's lead in that regard, but I doubt that Nintendo ever would. As far Microsoft's media offerings go, they do have the Zune, but it's not as tightly leveraged with the 360 as the PSP is with the PS3.
Edit: posted before I read this:
http://arstechnica.com/news.ars/post/20090108-open-source-mono-framework-brings-c-to-iphone-and-wii.html
In short, games developed with Microsoft's .Net framework will be easier to port, well, anywhere you can run Mono, which so far means iPhone, Wii, and, unsurprisingly, Android.
Nintendo's advantage is that they're playing a different game entirely. The Wii has some media center functionality, but it's quite limited by comparison to the 360 and PS3. There's streaming video, but that's tightly controlled by Nintendo, and there's photo display, as well as stored video playback, though SD card support is limited to 2Gb. Insufficient for power users, but probably good enough for mom.
However, they're taking solid aim at the home fitness video market. While DVDs are dirt cheap, the Wii provides interactivity both with the Wiimote and data storage and tracking. It remains to be seen how well this is going to play out, but hopefully we'll see ports of ANT based fitness peripherals to Wii fitness titles. But then, You!Fit and Kinetic didn't exactly make bestseller lists, but on the gripping hand, the Wii is selling to demographics that lie fairly outside the PS2 and Xbox.
The third target Nintendo is aiming at is WebTV. While the web browser costs extra, news, weather, and email are free. However, it's not a priority. The email client is still very much a v0.9 release, and navigation is awkward. But if Nintendo releases a Wii keyboard, that'll be the sign that the Wii has started to penetrate the grandparents' demographic. Expect it to be white, with slightly oversized keys, and high contrast blue labels on the keys.
And the aforementioned Wiimotion upgrade is intended to appeal to more demanding gamers, and hopefully developers.