I can honestly say that I see little risk of the Wii suddenly stop selling.
Currently, we have seen very little evidence that the Wii is selling particularly poorly to current HDTV owners; people who own HDTVs continue to buy the Wii even though it only supports 480p. Over the next 4 years (or so) DVD players will still remain dominant, 480p broadcasts will still be the most common format for digital television and many/most HDTV owners will be buying their TVs because they are large and flat rather than their output resolution or image quality.
Even if I am wrong and HDTV owners begin to reject the Wii in (late) 2009 the Wii sales will (probably) not drop off. For Christmas 2009 I anticipate the Wii will be $150 (with only Wii sports) or $200 (with Wii Sports, Wii Fit and/or and additional Wiimote and nunchuck) and will continue to see price reductions until the end of the generation in 2011/2012. In my opinion the type of person who will be buying a console in the $100 to $150 is probably not an early adopter in HDTV, will likely not spend the additional $100 to $200 to buy a XBox 360 or PS3 if they have a PS3, or could potentially be a multi-console owner who is buying the Wii for a handful of exclusive games they're interested in.
On a side note, I believe that the majority of analysts have overestimated the rate of HDTV adoption over the next 5 years because of the unusual spending habits of the past 6 to 10 years. As I have said before, home equity loans have enabled people to tap into their home equity to increase their spending at a faster rate than their income has risen; at the same time record low interest rates have pushed housing values to record levels which produced unsustainable levels of home equity for the average person.
The housing slump and sub-prime crisis is going to eliminate a lot of home equity (in many cases the house's value will be lower than the mortgage), the Fed will stay at lower interest rates because high inflation is more politically acceptable, and the devaluation of the American dollar will result in 'record' high energy prices which (combined with other inflation) makes the cost of living rise dramatically faster than people's incomes.
The overall negative position of the economy over the next 18 to 24 months will greatly reduce people's ability and desire to buy luxury items.
