It's not a secret that Wii is way overpriced. They could have been a little more generous with the specs and still delivered it at the same price point. It seems the original Xbox is
probably more technologically capable than Wii.
Either way that decision is not surprising coming from Epic. It's pretty obvious that they don't exactly represent the creative end of the gaming industry. They're after all the company that is making a living of selling their middleware.
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Still, the situation is this: A vast market pie is just waiting to be eaten, but he decides to hold back his company's appetite in the name of artistic integrity. Good for him and the developers. Not exactly healthy for his company, but hey, that's 2-3 Wii games I don't have to worry about buying. Right?
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The pie might not be as big as it looks.
I'm not sure how well this stands up to the Wii. But in the past, Nintendo were pretty known to cannibalize their own market.
Wii has the lowest games sold per console ratio out of the three, which gives third parties, despite Nintendo's huge success in hardware sales, a good reason to do some twice-thinking about the potential market.