Compete or die? What are you talking about?
Right now Nintendo has been padding their accounts with success of a console that actually makes money for every unit sold. I don't know if 360s are not turning a profit, but the PS3 is still being sold in the red.
Most people don't have HDtv yet. Being on Slashdot, you probably surround yourself with a small group of people who happen to be very tech savvy. The majority of the world hasn't upgraded.
All of this translates to something simple: Nintendo will be able to transition well to a new generation. They will be able to produce a new console at a lower price as the tech costs fall. By coming out with something new, they will likely force Sony and Microsoft to come out with something (anything) to try to show their own innovation.
Tons of comments in this thread complaining that the Wii can't support higher res... problem is, the Wii's target audience doesn't really care.
A couple of my friends own sick HD flat screens I would kill for, yet their only system is a Wii. They play Wii sports, Guitar Hero, etc. and love it. No use for a PS3 or Xbox - even with the quality picture.
So, the purpose is not to prevent piracy, but to prevent multiple legal resales of games... which would only result in further illegal piracy.
Sounds like a winning argument to me...