What's wrong with being a niche console? I kind of think they should take the first route you mentioned. Create a simple console, no more than $250 with a game, and try to piece together a coalition of clientele of families, children, some casuals, nintendo loyalists, and a percentage of the hard-core crowd who may be tired of Call of Duty as a secondary. I think it's reasonable to sell 30-40 million doing this. The problem with the Wii U as some ahve pointed out in other threads they are in between Sony and Xbox with 400 - 500 and the last generation ps3 and 360 which are 200 and they don't really know who they want to sell to. They need to figure that out. Price-wise if they were closer to last, maybe a little more with some evolutionary twist with the movement controls and had made the gamepad just an accessory, I think they would be a lot better off right now.
The problem with the second, and you can see for yourself, every generation since the original NES had ever reducing sales. NES - 70 SNES 50 N64 34 Gamecube 22 Meaning back then they were going up with their competitors power wise and especially game development becoming more expensive they were losing...Until of course the Wii.
Another problem is that Microsoft and Sony are years ahead of them in terms of building an online infrastructure, millions of loyal people of hard core gamers, and other things which would require nintendo to dump a lot of money into just coming upto the same level as their competitors if they took that route.
My recommendations - make the Gamepad an accessory or redesign a cheaper version of it to enable dropping the price to around 200 dollars, continue making killer games and advertise, to salvage this generation. And then think of making a system no more than 250 that is simple.
I would do that along with allowing people to access their virtual console on android and apple phones. Sell a controller that attaches onto the phone for 40 - 50 dollars. Keep your current and new games only on the 3ds, so as to give people a reason to buy the 3ds. I would also make mini-games along with giving people access to the old. and Who knows after people get a taste of the mini-games maybe they'll want to update to the better ones on the wii u or the ads.
