Nintendo didn't go for a niche market - they went for the family and friends market. They went for the everyday joe6pack and his wife and two kids. They focused on making games fun and more interactive. PS3 and Xbox360 however focus on the hardcore gamers that want high powered graphics and games you immerse yourself in. This is actually a smaller market than the Wii's, but you have a higher volume of games per buyer.
IMO Nintendo's done a stroke of genius in that they're no longer competing with Sony and Microsoft and have left them to compete with each other instead. I can easily see a gamer buying a Wii in addition to a PS3 or 360 simply due to price, but you'll have more of a division in PS3 vs 360.
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