All Nintendo did was find a way to tap into the majority of the PS2 audience, keep most of its existing base, and bring in some new customers.
Every time Nintendo tried to make a system for Nintendo loyalists they sold less and less hardware and software. Gamecube had an attach rate of 9+ but sold only ~220m units of software.
If Sony hadn't tried to breach the Gameboy monopoly with PSP I think Nintendo may have just made another high powered system ala Gamecube. But with DS necessary and successful against PSP it would have absurd not to try the same successful strategy with Wii.
Most of you guys who claim to be hardcore only play 'blockbuster' games. You're over served as a demographic there are literally thousands of similar games on previous generation machines that will never be played by most people because despite dozens to hundreds of would-be blockbusters being produced each year most of you will only play 5-10 of them, and even so thats more than most other people. If it costs $20m for said blockbuster now and only ~5 will do well enough to justify costs in a year its time to focus on serving the other more fractured audiences. This has already been happening: its the reason why the 120m gamers with PS2 have never bought more than ~15m copies of one game (GTA), while the NES had unbundled games sell ~19m (Mario Brothers 3) despite having only 62m users. Games like Boom Blox and Little Big Planet are what the industry needs more of because of their playability and ease of development.
There could be 300m machines sold this generation, but most of the growth from 180m PS2s/Xboxs/GCs isn't going to be for the Metal Gears, the Halos, the GTAs, the Marios, the Final Fantasies, its going to be from the Nintendogs/the Wii Sports/the Wii Fit/the Little Big Planets/eye toy/motion plus/etc.
This happens every generation (among machines to sell ever 20m):
NES - brought in 80% of people under 12, probably 50% of people under 20, and 25% of people under 35
Genesis - took portions of the above groups, added 20-30% of people under 20, another 15% of people under 35
SNES - kept what Sega didn't take with Genesis, but did well as demographics grew
PS1 - took probably 65% of the 15-35 male audience, 35% of people under 15 & women
N64 - took what was left
PS2 - took 55% of the 10-40 male audience, 40% of people under 15 & women, 60% of all else,
GC - 40% of people under 15, 15% of the 10-40 male audience, 35% of women, 15% of all else,
Xb - 20% of people under 15, 30% of the 10-40 male audience, 25% of women, 25% of all else
Wii - 70% of the under 15 audience, 30% of the 15-25 male audience, 65% of the 15-25 female audience, 55% of the 25-35 audience (40% men vs. 70% women), 65% of the 35-45 audience, 75% of the 45-55 audience, 50% of the 55+ audience, probably a 60%-40% male to female split overall
PS3 - 10% of the under 15 audience, 30% of the 15-25 male audience, 25% of the 15-25 female audience, 30% of the 25-35 audience, 10% of the 35-45 audience, 15% of the 45-55 audience, 20% of the 55+ audience, probably a 70%-30% male to female split overall
360 - 20% of the under 15 audience, 40% of the 15-25 male audience, 10% of the 15-25 female audience, 15% of the 25-35 audience, 25% of the 35-45 audience, 10% of the 45-55 audience, 30% of the 55+ audience, probably an 80%-20% male to female split overall.
