Put simply, Nintendo played it smart. They knew that direct competition in sheer power would make no sense when up against the financial powerhouses of Sony and Microsoft (Sony makes everything from TVs to computers to movies, Microsoft has their operating system and assorted other programs, if you could call them that, to fall back on). Nintendo decided to do what any company in it's position would do. Become a low cost leader and differentiate itself away from its competitors at the same time.

As such, they went with less powerful but still decent and effective processors for graphics, trimmed the fat that inflates prices of systems like unneeded video players (Sony's mistake) and made it fully compatible with the old Gamecube equipment (Microsoft and Sony didn't make it all the way) with the additional bonus of downloading older games for people who like classic games.

This has simply allowed the Wii to be more accessible to both consumers and other video game developers while maximizing profits for Nintendo itself. Because it isn't as graphically powerful and not crammed full of unneeded junk, it is inexpensive to make and can be cheaply sold. Also, recently third party developers have decided to switch away from the other two systems, primarily Sony, because purchasing and using development software for them has become to expensive to use. Simply put, it's cheaper and there's more opportunity for making money by avoiding the expensive stuff and taking the cheaper and easier way.

For people who like numbers, the cost of producing one Wii has been estimated to be around $200, and is then sold for $250. Thus, making 1 million Wiis costs Nintendo $200,000,000. However, since they make a $50 profit on each system, they only need to sell 800,000 Wiis to make up their losses. Each additional Wii sold is then $250 of pure profit for Nintendo. If all of them are sold, much like how things have been going for them, that an additional $50,000,000 for Nintendo. Also, since their games are relatively cheaper to make when compared to Sony and Microsoft, they also have greater possibilities for profit for both Nintendo (they make their own in addition to licensing) as well as third party developers.

Microsoft and Sony both sell their systems at a loss. In Sony's case for the full system at the start, it was for at least a $100 loss. They both rely solely on sales of game disks to recoup those losses and turn a profit. However, since it's more expensive to make games, especially for the PS3, their profits on games start to shrink as well in addition to driving away the third party developers they rely on for most of their games (simply put, unless they buy those companies out, there's no guaranteed loyalty, and unlike Nintendo, they do not have their own established single system franchises with their own characters).

In short, in the economic sense of things, Nintendo, by playing it smart and avoiding direct competition, has already established itself to remain through this video game generation or whatever you'd like to call it. If it is not yet as an outright winner, it is at least as defeating expectations from Sony, Microsoft, and their respective hyper fanboy bases. After all, they thought it would be dead within a month of release. Meanwhile, Microsoft is still in just because it was released a year early (and with the usual Microsoft problems), and Sony is slowly bleeding from the throat in its video game division (they'll survive as a company and maybe as a console maker, but they won't be taking as big of a hit from their wallet to make the things ever again).

On a personal side note, I happen to not own any of these systems, and I have only played the Wii. In this little article, I was just using economic sense in case anyone out there has an idea about how companies have to make money besides economists and business people. The Wii would be the only system I would spend my own money (which I do not have enough of) on for two main reasons. One, it is the least expensive of the three on all fronts. Two, they actually seem to care about the people who buy their games and systems (for comparison, I've had really bad issues with Microsoft's help for their junk having to do with my computer's web browser and assorted other things and from what I have heard, Sony's is a bit on the poorer side too). After all, unlike Sony and Microsoft, the only things Nintendo makes are game consoles and games themselves. Probably why they care more…