Because they didn't care what the mainstream audience wanted. They attempted to dictate to the mainstream audience what it should care about, but that's not how it works. As for X-Box Live: Look, Live is fantastic. I'm a big fan of the service. But it was not what was used to sell people on the system; it was not the outward face MS showed to the public - the games were. And those games were not friendly to general audiences; the controller was not friendly to general audiences.
And I'm fairly sure that, without the Wii, neither would have had the slightest clue how to approach the mainstream audience. All of MS and Sony's attempts prior to Kinect to engage a larger audience failed horribly; Kinect was the first time either showed the slightest bit of understanding as to what Nintendo had done and how to, in some small part, recreate it.
Yes. It works for Microsoft, a company that has invested billions of dollars it will possibly never recoup into getting things up and running. Nintendo cannot do that; Sony cannot do that. You are proposing that this is some highly intelligent move, except it requires having one step short of a monopolistic hold on a market for over two decades to maintain.
They're doing well. That's great. But to suggest that some general strategy can be gleaned from their example is a bit illogical.
