I honestly don't think the library is as big of an issue as the hardware concept itself.
This is the game machine no one asked for. It doesn't have a hook as strong as the Wiimote which created a ton of excitement with casuals and interested even core gamers enough to want one (even if it was as a secondary/"pull it out when the grandparents are over" type thing).
It doesn't represent enough of a hardware leap beyond the PS3/360 to excite core players who want a real upgrade after 6-7 years of that generation cycle.
The console is flawed from its conceptual stages period.
They can throw all the Mario Kart, Mario 3D, Metroid, Zelda, DKC, etc. they want at the console IMO. It won't change things much, without the casual bubble to carry them this is just going to end up like a glorified GameCube. This is just like the GameCube when Nintendo fans kept saying "wait for Mario, Zelda, and Mario Kart!". They even had Resident Evil. Still didn't work. People didn't want a purple lunchbox console that didn't play DVDs and didn't have GTA or a proper successor to GoldenEye/Perfect Dark.
Barring some kind of new miracle, breakout franchise that brings in a new audience, but Nintendo seems very reluctant to spend any real development + marketing dollars on a franchise that isn't tied to their existing IP.
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