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If a product has features they want at a price they are willing to pay, then it has value regardless of how much profit the manufacturer makes.

While a product that has all the technology in the world given away for free provides little value if it has features that people aren't interested in.

The Wii provides certain features that the PS3 and 360 do not, including but not limited to ease of use, interactivity and available software. To many consumers, these features are more important than graphics and internet connectivity.