I also largely agree with Erik Aston and Sky Render's posts in this thread. But to add something original, I would take aim at this false notion that has grown up that "video game consoles always sell hardware at a loss, then make it back on software." Really? Because what we know of company financials suggests that's a TERRIBLE business strategy.

Here are some consoles that were sold at a profit from the very beginning:
All Nintendo products
Atari 2600 (Bushnell and co. did not have the capital to sell under cost!)
Sega Genesis/Megadrive
Sony Playstation

Here are some consoles that adopted a loss-leading strategy:
Sega Saturn
Sega Dreamcast
Sony PS2
Sony PS3
Microsoft XBox
Microsoft XBox 360

Notice any kind of pattern? With the very notable exception of the PS2, every single console that adopted a loss-leading strategy lost money. In most cases, vast sums of money. Over and over again, the companies in this list tried to "win" market share against their rivals by pricing their hardware under cost. The Saturn tried to beat its nemesis (Playstation) by selling under cost, and the resulting flameout lost Sega hundreds of millions of dollars. The same scenario was repeated four years later with Dreamcast/PS2. We're all well familiar with the struggles of the PS3 and Microsoft's XBox line. Ironically, the startups for each company where they first tasted mainstream success (Genesis, Playstation, etc.) which HAD to sell at a profit ended up doing better from a profits standpoint. Probably because the companies in question couldn't write off massive losses and had to work to make a profit from day one!

When did this silly strategy suddenly become the orthodoxy in the gaming world?! It only works so long as massive companies (Sony/Microsoft) can siphon off money from their other divisions to pay the bills. Yes, it works if you end up with a massive runaway success like the PS2. In *ANY* other scenario, your company takes tremendous losses. This business strategy is a FAILURE. I give Nintendo credit for realizing it and pursuing alternative paths - which are obviously working.

its not anything but how the public views it.

Microsoft viewed by the public like:
xbox breaks down.. no ones wants to buy it. (M$ has fixed this problem somewhat but its in the back of everyones head and this is one of the main reasons its not selling to people who do not read the internet everyday)

Sony is viewed by the public like:
has no games and cost to much money plus blu-ray is not worth it. (when this is all BS. Sony has many GOOD games the price 400 bucks is awesome for everything you get and blu-ray is a huge upgrade. any fool knows that but no one sees this unless you are on the internet allday)

Nintendo
Cool system very fun. New way to play games. Something that has not been done before (when in its not even a noticable upgrade from its last system, games are lacking, online sucks, and the controls do not work in all games.. in fact they hurt most games)

People buy stuff by whats popular. thats how you get the casuals.. by just being the "it" thing. Its was PS1, then ps2, now its the wii.

Well thank goodness you're so much smarter than the public. Else who would tell them what to think?

You should get a job at Gamestop or Best Buy and tell them the truth. Make sure to talk loudly and slowly so the casuals will understand.

k i use to work at gamestop.. but not anymore but thanks ill get right on it!

Nope.

The movie deals are all but worthless on game consoles -you know, for playing games- but they do offer something for technophiles. As for graphics, they've never mattered, and the market has shouted its loud and enthusiastic agreement with this assertion.

It really depends on how the shareholders of the company see things. I wonder which people hold the greatest sway in Sony and MS? If those people don't intervene, prices will continue to drop and may lead to even more losses.

The quality of many Wii games ( even those made by Nintendo ) are questionable...

Walmart is a good example but I think a lot of people will not realize why ... Everyone thinks Walmart is only successful because it is cheaper than the competition, but in my lifetime there have been several stores which were noticeably cheaper than their competition and were never as successful as Walmart.

So if Walmart isn't successful because of price, and they're obviously not successful because of quality or customer service, why are they successful? The answer is 'because they're convenient'

There are millions of people in the world who end up runing several shopping errands in a week who would (much) rather make 1 stop at the Walmart that is pretty close to their house than to make 4 or 5 stops in various places to pick up the same things.

Perhaps this has already been said, (haven't read past here) but you don't understand what JaggedSac means.

Price is a factor in buying a games console in the first place because price is a factor in anything we buy..... but once you have decided "I'm going to buy a games console" the price of the Wii doesn't come into it.... people will either buy a Wii, or not buy a Wii (instead buying PS3 or 360) they decided which of the 2 paths to go and as Wii has no similar competition the price doesn't matter.

This was the same last generation... when people decided to buy a console, they might have been poor and only just able to afford a PS2, but that didn't make them buy a cheaper GameCube instead, they just went and bought a PS2 anyway. Of course there are exceptions, like if unknowing parents go to buy a console for you, they might simply buy the cheapest anyway... or whichever is the most well known anyway.