Early this week, I wrote about how the Blu-ray drive in the PlayStation 3 is changing the video game business. Sony's console is built for gaming, but features like Blu-ray and online connectivity make it a home entertainment system in disguise. So is Microsoft's Xbox 360.

It's no secret that Sony and Microsoft are fighting to establish a footprint in the American living room. That's why they're both willing to lose money selling consoles – they think they'll make the money up on games, but also with online services and video on demand. For the past few years, however, both companies have gone out of their way to market their machines as game consoles, which only made sense. What self-respecting gamer is going to buy a movie machine?

All three companies fought for the family market during their annual presentations at the E3 industry conference. Microsoft made the case that its Xbox 360 is a full-featured home entertainment system, complete with the ability to download TV shows and movies, through a deal with Netflix. Sony announced its own movie service, and pointed out that its PS3 already supports the movie format of the future. Both showed impressive games, but the hardcore gamers who are waiting for them have already bought a console. Now they're fighting over the family audience.

So far, Nintendo has captured most of that audience – not only because the Wii is delightfully easy to use, but because the price is right: $250. And, to the despair of fanboys, Nintendo kept pushing its family appeal. Its new "Animal Crossing" game is like MySpace for the stuffed animal crowd. And "Wii Music" seems made for the younger siblings of "Guitar Hero" fans.

Nintendo has no broader home entertainment strategy. The Wii isn't meant for TV, movies, or music – just plain old games. And in an age of integrated entertainment, some analysts suggest it won't be nearly as appealing.

I don't believe this for a minute. For hardcore gamers, the 360 or PS3 are the obvious choices. But I think families will stick with the Wii. As we head into a recession, the Wii looks like a bargain – and Nintendo could easily lower the price without cutting into its profit. For many adults, renting movies through a game machine just sounds confusing – whether it actually is or not. And while Xbox Live is optimized for gamers, Nintendo's online service sacrifices ease-of -use for security features that make parents feel better about who their kids are talking to. These kinds of features are why Nintendo is winning this round of the console war – and why it will keep on winning for at least another year.