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The fact that the Wii is very very different from the PS360 doesn't mean it's not directly competing. That's just smart business. You want to differentiate yourself from your competitors, to advertise a unique experience that they can't provide.

The Wii being really different is part of the DIRECT COMPETITION. And it's a huge asset. Meanwhile, some people can't really tell the difference between a PS3 and a 360, except one has Halo.

Also, a lower price point is also part of the competition. If you're different AND cheaper, people will remember you.