I think there is denial on both sides of the issue. They are competing in the fact that they are taking entertainment dollars. But, we could bring in the PC as well, which people seem to accept as a different market. But the truth is that HD consoles are owning the PC market.
With the Wii and HD consoles, you can't deny the fact that third parties are segmenting the market differently than last generation. Even though the Wii is kicking ass and taking names in terms of sales, HD consoles are also increasing in sales as well. With the strong competition between Sony and MS, games like DMC and GTA are increasing total sales over the previous generation. It's a fanboy's dream if you think companies are going to completely throw away HD game development in the dumpster.
Third party support for the Wii will get stronger, but it may be different kinds of titles, with some exceptions.
"Naturally the common people don't want war: Neither in Russia, nor in England, nor for that matter in Germany. That is understood. But, after all, IT IS THE LEADERS of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship. Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is TELL THEM THEY ARE BEING ATTACKED, and denounce the peacemakers for lack of patriotism and exposing the country to danger. IT WORKS THE SAME IN ANY COUNTRY." --Hermann Goering, leading Nazi party member, at the Nuremberg War Crime Trials
Conservatives: Pushing for a small enough government to be a guest in your living room, or even better - your uterus.