Which games will they buy?
Which console casual games have taken off as huge hits in the last 3-4 years?
What you think is "value" is not the same to a casual player, they want simple games that they can get good at and occupy some of their time.
You're trying to sell a $60 three course dinner to a person who just wants a $6 hamburger and some fries. It doesn't matter how good your $60 dinner is quality wise, sometimes a person just wants a freaking hamburger and fries and nothing else.
Smartphones and tablets have dramatically changed the game, there is no need for Nintendo anymore, casuals are overserved (actually) nowadays at a price point Nintendo can't come close to. Mario is nice, but he's not enough.
If the iPhone and smartphone app infastructure existed as the same way in 2006, IMO the Wii and Wii Sports wouldn't have taken off in nearly the same way, IMO. There was a need for Wii Sports in 2006, because there was no one serving the market for people who wanted to play simple games back then.
But today that barrier has been completely removed and casuals have choices that are far more appealling to them than the business model Nintendo is trying to offer ($200-$300 systems + $40-$60 games).
Who says there have been good expanded audience games in the past few years?
Actually that's pretty true for everyone, everyone wants games they can play easily and will engross them for a period of time, its not just a "casual" demand
Sometimes they do, but most will still go out and seek the $60 meal if its so delicious that its worth $60, the key is giving the value. (People eat the cheap meal because it gives a value for its low price, if they can get value that compares to the price for the higher priced meal they will eat it, maybe not as often, maybe once or twice a month as compared to once or twice a week for the cheap meal, but they will still seek it out)
Bad Mario games are not enough you are correct, thing is its been a long while since Nintendo released a quality Mario game (back in the SNES era)
Nope, the Wii delivered value, the games Wii Sports & Wii Fit were somethings that engaged people, thing is, no system has found the next Wii Sports or Wii Fit.
As I said, if you don't satisfy the value demands of the expanded audience, they won't buy.
Expanded Audience gamers are not stupid, they won't buy crap, they demand value. In many ways they are more discerning than core gamers, who will buy anything that gets good reviews, expanded audience gamers care little about media reviews.
Its not price that is the barrier, its the failure to deliver quality, even Miyamoto admitted he hasn't been delivering the quality that the expanded audience wants when he said that:
"Their attitude is, 'okay, I am the customer. You are supposed to entertain me.' It's kind of a passive attitude they're taking, and to me it's kind of a pathetic thing."
He wants to make games that appeals to him, not games that give value to the expanded audience, this is why they have failed to retain the expanded audience, not because of the rise of tablet and mobile games.