Nintendo isn't competing, they're dominating!
Historically speaking, consoles have always been the obsolete and inexpensive brother to the PC that people buy because it is simple to use and fun; processing power and multimedia features never really factored into the equation because (after all) the PC dominated in this market space anyways.
Sony was probably the first (and only) company to ever break with convention and produce a multi-media focused home console that was ever successful; the PS2 was unusually successful because Sony was able to produce and manufacture the PS2 at a price which enabled a conventional price ($300), it was the sequel to a remarkably successful platform (the Playstation), the main multi-media functionality was just hitting the mass adoption point, and its only real competition came 18 months after it was released.
The PS3 and XBox 360 represents the mistakes that have been made by countless manufacturers before under the belief that processing power or multimedia features matter; they (not the Wii) is the unconventional console which is doomed to failure.
