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Marginally weaker? Please name one game on PS1 that even remotely looked as good as Majora's Mask. I'll reiterate again that as for that console war, dream cast was already dropping out by the timeGC and Xbox came around making the PS2 the weakest console, which ended up being the clear market winner.

The Wii U is not vastly behind in the same way the Wii was. I'd say at most the PS4/720 from the current rumoured specs are 4 times more powerful whereas the PS3/360 were at minimum 10X. We are not going to see the same difference in graphics as we did last generation and this will be confirmed once 3rd party games that are being developed for the next gen get ported to the Wii U.

I completely agree with you on that one and as Iwata explained, this is due to the fact that the final versions of the Wii U dev kits were not given to developers until several months before the Wii U's release which was a huge fault on Nintendo's behalf. I believe Nintendo's E3 showings will lay to rest any comparisons of the Wii U to the current gen.

We don't know how far behind the Wii U will be.  What is known is the WiiU will have at least 4x less memory than what is seen with the rumored specs of the next Playstation and Microsoft consoles.  Other things are also out there as being far short, with very likely the likes of internal storage, where the WiiU will very likely be puny in comparison, meaning the DLC route is less prevalent on it.

The thing is that, if the Wii U does hold its own, and is able to get comparable content as what Sony and Microsoft's consoles do, then Microsoft and Sony will bleed billions and be at risk of dropping out.  It means that you can't get a boost in graphics at a level that people want to pay for.  The game will change here.  The question is how.  If the Wii U is competitive this coming generation, it likely ends up winning, with the cheapest to produce console, and an industry that can't just throw more horsepower at solutions thinking it makes a difference.  And all the demands for "we need a new platform" to drive software sales, also won't be there.