Counterpoint: when has the successor to a market leading console launched a year of more before the competition?The answer is either "never" or "once" (if we discount the Dreamcast...).

If you're trying to use prior data to gauge future performance, it's not much to go by. The examples you gave are actually poor ones, since the 360 for certain did not achieve a large lead during its one-year head start (and was very quickly surpassed by the Wii; the only reason things are even close today is because the Wii's support effectively died two years ago). I don't have data for North America on the Genesis' lifetime performance, but I do know that its headstart in Japan did it zero good (it placed third, behind even the TG-16) and I believe it did worse in North America as well (ultimately, the Genesis sold roughly 20 million fewer units worldwide than the SNES, notwithstanding its headstart and its superior performance in Europe).

I see nothing to indicate that lead time is a particularly big factor for success. The SNES crushed the Genesis and TG-16. The PS1 beat the N64, but not only is that the sole example, it is also likely better explained by Nintendo's failures than Sony's lead time. The Dreamcast's lead time did it virtually zero good, seeing as how the system lasted a scant 2-3 years. The 360 lost to the Wii, notwithstanding that it still effectively has three* extra years on the market.

The prior four generations indicate that lead time has far less import than you're asserting. I submit that other factors are far, far more important to the final outcome, even for third-party support, than being on the market a year or two before the competition.

*Again, in light of the release schedule I consider the Wii largely to have been abandoned starting in 2011. Notable releases became...scarce...starting in that year. Even assuming, arguendo, that the 360 has only one additional year, the 360 will not only still lose, but no rational arguement can be made that the additional lead time would be responsible for its gradual gaining on the Wii. Especially since its status as a second-place console, while likely, is even now not set in stone.

That's the only thing I'm thinking about right now!

...

I actually submit that the segment that's sticking to free/$1 games are either people who wouldn't be interested in any other type of game in the first place or, much more commonly, are not seeing other types of games that would attract them. By that, I mean that the game industry is largely not creating the type of title that these people think is worth actually paying for. I further submit that: 1) this is a failing of the game industry as it currently exists, rather than of the market, and 2) few companies can subsist if they permit gaming to come down to free/$1 dollar games, asI do not believe the AAAA market is in any way sustainable, and I know that relying on $1 games is not a viable plan for anyone beyond the hobby developer.

Your points are well taken, but I have a different slant on them. I do not believe that the middle market ever disappeared, for the simple reason that I've seen no evidence that it has. I believe instead that rising development costs have so polarized the type of games created that this middle market has essentially been starved. Where in past generations development costs were reasonable enough to allow most developers to create a wide assortment of games to appeal to a wide assortment of people, now development costs are so high that publishers feel compelled to always play it "safe."

Thus, the "best" teams, and even most of the B-tier teams, are stuck making narrower and narrower types of games, creating the "hit-driven market" that has existed for the past generation. Diversification at the highest levels has largely fallen to the wayside; this is a charge that has not been levelled just by forum- "analysts" like myself, but by many of the same developers who make up the industry. Experimentation and risk are, quite simply, too expensive to try. And so we have birthed the stratification that we have now: ridiculously-high budget AAA (and now AAAA!!!) games, dirt-cheap "indie" games made by folks who have either fled the rigors of the modern game industry or (worse) folks who simply couldn't crack it in the first place, and precious little product left for the middle ground. I submit that you have the chicken and egg confused: the last generation and even the DS have shown that the middle market very much still exists, but when no one makes games for them how can it be a surprise that it fades away?

As further evidence of my hypothesis, I submit Nintendo and the Wii. The games it offered, at least initially, were not aimed at the top tier AAAA gamer. They were also most certainly not aimed at the person who thinks so poorly of videogames that he'd only spend $1 to play them! And yet those games created the market leader. They created a market leader that sold at a rate which outpaced all prior consoles. They sold at a rate that made Nintendo, a company of roughly 3,000 employees, the most valuable company in the world's second-largest economy. If this "middle-tier" gamer has disappeared, he has done so only in the past 2-3 years.

You said in your post that " there will be even fewer that can afford the ps3 level costs if that portion of the consumer base isn't there." I completely agree. I think, and last generation shows, that even PS3-level budgets have already risen too high. I have said before, even in this very thread, that I don't have particularly high expectations for the Wii U. Basically, I think that if the Wii U is going to have a chance at being anywhere near as successful as the Wii was, it'll be because it offered a life raft for third-parties, and because companies started to once again appeal to folks who demand less than AAAA flash, but also more substance than the $1 phone game.

I'm less than wholly optimistic at the moment.

It has always been this way on this website. During the early Wii years every few weeks we got a "Wii is not sold out anymore, let's rejoice, the fad is over" thread, sometimes using proof like a picture showing two Wiis that were spotted at some retailer.

Not that this only happens to Nintendo on this website. There are people in all camps who rush to post negative news/rumors about the companies they don't like. Ironically, the very same people who rush to post negative threads most of the time also happen to be the ones who complain the most when negative threads about their prefered company are posted.

I don't know if Nintendo really has shipped more Wii U's than Wiis.

It's just that there isn't the same crazed demand this time out. Wii was completely new and different from anything most people had seen before in 2006, Wii U is not the same thing.

Nintendo has forecast 3.5 million Wii Us through next March, that's actually less than Wii I think, so they likely don't have many more systems to allocate here than they did in 2006. The difference is demand is at a more reasonable level.

The system will do OK through the holidays, I think the challenge for Nintendo is going to be selling a $300-$350 piece of hardware next year though. I suspect you'll see a $50 price cut by next summer. I think Jan-April in particular are going to be tough for the Wii U.