No it didn't. The PlayStation 3 outsold the Xbox 360. Have a look at the 7th generation charts on VGChartz:
It's true the Wii sold the most.
The 8th generation didn't go well for Nintendo. The Wii U was a flop. But they're back on top with the Switch.
It's true the devs have become more comfortable develeoping games as the console matured but that's about it.
Xbox was always flop comparing to PS
For PS3 vs 360, the PS3 sold 87.40M units to the 360's 85.73M.
In this case, better to reduce early sales which are sold at a loss (production being expensive, significant R&D, scale being low), maximise at the end of the life when i assume they are maximising profits per console due to scale and R&D already being covered.
So, no -- it is never better to reduce early sales. You want to sell as many units as possible, as many games as possible, as many accessories as possible, as soon as possible.
(Also, as the same console does becomes cheaper to manufacture over the years, the price tends to go down as well.)
The PS3 started outselling the Xbox 360 for the year in 2007 and kept steadily gaining on the Xbox in total sales for the generation until it overtook it.
Xbox's one year head start kept it level with the PlayStation 3 for quite a while but it lost out in the end.
Look at the global yearly sales figures on VGChartz. From 2007 the PS3 outsold the Xbox 360 every year except for 2008:
The charts you link to show game sales that lag way behind the xbox. For example Skyrim sold 2.6 million in 2011 on the xbox and only a million on the ps3.
I only say this because I got my ps3 for free with the purchase of a Sony television at a Sony store (remember those?) in late 2009 and never purchased more than a bare handful of games which I almost never played.
After the cost-reduced redesign in 2009 Sony gave away a free ps3 with every television purchase in Sony stores for almost an entire year.
Skyrim was one the games I bought and it was so buggy, even for Bethesda, on the ps3 due to ram limitations (I've read) that I purchased it again for pc.
Used my ps3 to watch a ton of blurays and Netflix, though. My ps3 was, and based on those yearly charts a lot of other peoples' ps3s were also, extremely powerful streaming boxes and I only retired mine when I upgraded to a 4k tv and got an appletv 4k.
You have to consider total software sales, not individual titles. And for the PS3 you have to consider its impact on blu-ray movie sales (which aren't in those charts).
Blu-ray also launched in 2006 and the PS3 was one of the most useful players available because it could do more than just play movies.
I think it wasnt a big deal in the rest of the world. Then Microsoft console focused on "doning more that just play" and flopped worldwide.
As you write later, Skyrim sucked on PS3 (like other multiplatform games like Bayonetta). It is not strange that it sold much less since it was a much worser game on the PS3.
Snark: Nintendo’s market is kids, people with kids, and people who were previously kids. Xbox and PlayStation are fighting over the market of people who’d be better served by a PC but don’t want to deal with all that. /Snark
That is to say, I still think there's significant competition for sales.
And if Nintendo didn't exist, it would be easier for Sony and Microsoft to take in the market for cute, whimsical, child-friendly, instead of having to distinguish themselves by being the more serious or more powerful option.
And handhelds; Nintendo has more or less stolen that entire segment, Steam Deck still being relatively niche and PS Portal being a different kind of thing. Sony's handheld ambitions are moribund and not for lack of trying.
The target market for the Switch are people who play Animal Crossing, Super Mario Galaxy, and Zelda games.
There's some amount of crossover there, but there's also a large amount of separation in those markets. I know lots of people who play a ton of Animal Crossing and Zelda but would never want to play something like Borderlands or CoD or Darksouls.
Put another way, if Nintendo had a Sega-like market failure, then Sony and Microsoft would be the heirs apparent to the kingdom of cute. I'm sure they'd savor the opportunity. Do you think they wouldn't take these customers right now if they could?
And again, there's going to be a class of customers that could go either way but won't buy into two or more consoles, because they're expensive. They are directly competing for them.
But hey, the future is unknown, and my crystal ball is on the charger at the moment.
And there's gamers like myself, who mostly play games on PC but still have a Switch because while I can play a lot of those console games on my PC there's no offical way to play Zelda or Mario or the wide range of Nintendo first-party titles on PC. I think if Nintendo had a SEGA level implosion and started only being a publisher, whichever platforms Nintendo publishes for would become the heir to those consumers. I know that would be the case for me.
Assuming Nintendo steps away from the hardware biz, would they publish games exclusively to one console? Would they just start making mobile games? Would they sell on all consoles and PCs? ¯\_(ツ)_/¯
As, what, an ornament? People buy games consoles to play games on (or occasionally for movies or some such), and I think very few of the games that people are buying a Switch to play are even available on Xbox/PS, nor vice versa (or at least, the Switch ports of the games that people buy Xbox/PS to play are not on a level where those people would buy a Switch to play them).
That's a pretty damn large market (= all adults). I think you meant to say "people who were previously kids playing Nintendo"
Who is not included in that? Toddlers?
But yeah, I 100% agree that the overwhelming draw of Nintendo consoles is their exclusives, so it's mostly orthogonal to Xbox/PS/PC. If you want to play Mario or Zelda or Pokemon or Fire Emblem, you've got one choice. The common idea that the Steam Deck is competing with the Switch is almost entirely wrong.