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In some ways it was a fad, in others it wasn't.

Nintendo decided to primarily go for casual gamers with the Wii, and hey, at the time it came out, that worked very well! The Wii had by far the cheapest initial price tag, it is very small, silent and has the best design, something that fits nicely into modern feng-shui-inspired, TV-commercial-like empty living rooms.

But the real selling point were of course motion controls. That seemed like some excellent and innovative new idea that got people fantasizing about all the great new possibilities. Motion control heaven seemed unlimited, and many people probably even believed that traditional controls would soon vanish completely.

But sooner or later, the novelty wore off. It became more and more clear that the Wii is not the eternal holy grail of gaming. We realized that the original Wiimote is not perfect. It wasn't precise enough for some uses of motion controls. It has much fewer usable buttons/sticks than a traditional controller, which is problematic for traditional controlled games on the Wii.
The competitors weren't sleeping as well. Their consoles got way cheaper and they came out with their own motion control systems, which were even better than that of the Wii in at least some respect.

But what's even worse, we realized that the really great uses of motion controls are rather limited. Motion controls allowed for a few exciting and innovative new game concepts (like dancing and fitness), it can improve the experience of certain existing game concepts (like sports games), but for most other games it often only seemed as an annoying forced upon feature.

And of course with about 100 million units sold, at some point even the casual market got saturated. Then there's the problem of piracy: The Wii was hacked very quickly, it's very easy, doesn't cost anything, and even offers some great new features that the original unmodified Wii is missing. Unlike the PS3 and the 360, Wii piracy comes with hardly any problems. That really affects software sales.

So while the Wii's advantages constantly became less, it's disadvantages became more apparent: With more and more people having flat screen HD TVs, the Wii's blurry graphics look more and more scary, even when using a component cable. Online gaming is virtually non-existant and in general, unlike PS3/360 the Wii doesn't use the possibilites of being connected to the internet at all. Because of hardware limitations like extremely limited RAM, many big titles were never ported to the Wii.

The Wii lost much of it's original charme, the other consoles gained. It's simply time for a successor that fixes some of the Wii's problems.