Wii Will Win

February may be the shortest month of the year, but it will be enjoyable for a long time at Nintendo (OTC BB: NTDOY.PK). Video-game research firm NPD Group has the Wii outselling Sony (NYSE:SNE) and Microsoft's (NASDAQ:MSFT) next-generation systems for the month of February.

Trumping the PS3 was a given. Sony has struggled since the system's autumn launch. Availability was scarce before the holidays, and the $599 sticker price for the most popular model has scared many consumers away.

Clocking in ahead of Microsoft's system is another story. The Xbox 360 has been on the market since 2005. Ready availability and the success of the Xbox Live online interface helped it come in ahead of the pack over the holidays.

It's a whole new ball game now. One can argue that simply boiling it down to units sold is unfair. Moving 335,000 Wii systems at $250 apiece is in the same revenue-generating ballpark as moving 228,000 360s at $299 and $399 each, and only slightly ahead of Sony clearing 127,000 PS3 systems at $499 and $599 price points.

Still, focusing on dollar amounts alone is a hollow argument. This arms race was never about hardware revenue. In fact, most analysts assume that Nintendo is the only company making a profit on the actual system. The real reward lies in collecting high-margin licensing revenue from software title sales, and this is where being the volume leader in terms of consoles sold means everything.

Big brains at a Wii price
The Wii is smaller and less technically advanced than its costlier peers. Stick in a Blu-ray DVD, and it will spit it back out. You need the PS3 for that. It lacks the sheer processing muscle of the higher-end 360 and PS3. In short, you may never find yourself picking your jaw up off the floor after soaking in some of the graphics on the Wii, but any diehard gamer will tell you that's it's more about gameplay than eye candy.

This doesn't mean the PS3 blew it when it went for a better spec sheet. "The more ammo, the better" is a sound battle cry in the never-ending video-game wars. The real story here is Nintendo muscling its way to the top of last month's leaderboard by compensating for its technical shortcomings with ingenuity.

Most people will tell you the Wii is fun. I was a cynic. I poked fun at the name. (Wii all did.) I chided the company for trying to push the envelope too far with a motion-based remote in a couch-potato world.

I was wrong. We have several systems around our house, and the Wii is the only one that my wife allows to be connected to our main living-room television set. It is truly a family event; we gather for Wii Sports bowling tournaments, WarioWare brain ticklers, and virtually heaving the Madden pigskin.

Even my eldest son, who's 13 and can spend hours entrenched in a 360 Call of Duty game on Xbox Live, is never too jaded to challenge his little brother to some Wii Play mini games. My wife and I have actually been able to sleep in over the weekend, with the faraway Wii sounds keeping the kids entertained on the other side of the bedroom door.

I'm not certified to recommend a Wii as family therapy -- or even marriage therapy -- but I know we've been able to milk more out of this Christmas gift than any other we've had in ages.

The joys of discovery
High-end developers may dismiss the Wii as a weak canvas. Electronic Arts (NASDAQ:ERTS) is banking plenty on the upcoming release of Spore, but it has yet to commit to a Wii version. That is unlikely to change after a saucy critique from one of the game's developers. But since when is a richly rendered experience the universal definition for fun?

Besides, there is more to the Wii than just the $50 games sliding in and out. Every week seems to bring new layers of functionality. Two months ago, we were able to get weather forecasts from all over the world. We've been catching news feeds since last month. Last week, I found my son showing my wife how to stream videos from Google's (NASDAQ:GOOG) YouTube online. She hates watching videos on the PC, but had no problem lying back and marinating in the "clip culture" revolution from the comfort of the living room sofa. And a few days ago, we sat around the Wii and participated in polls. The responses were then stacked up against all of the world's participating voters.

The kicker here is that all this online functionality is free on the Wii as long as you have a wired or WiFi connection in your home. Sure, the Hewlett Packard MediaSmart television and Apple's new Apple TV offer greater convenience in convergence, but the Wii is showing up as a spunky entertainment appliance in our lives.

If I put a slice of bread into the Wii, I'm pretty sure it would come out as perfectly crisp toast. I don't want to chance it, of course. I don't want bread crumbs getting in the way of my family's bread-and-butter time together.

And going by February's data, my family is apparently not the only one to feel that way.

Nintendo and Electronic Arts are Stock Advisor newsletter service recommendations. To see what other portfolio plays are in this game, take a free 30-day trial of the newsletter today.

Microsoft is an Inside Value selection.

Longtime Fool contributor Rick Munarriz has been a fan of video games dating back to Pong. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.