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Contrary to what a quarter of the posts here bring up, Nintendo does not need the next console to be vastly stronger to the ps4 for success.

First, nintendo is not a loss leader and every console out the gate is profitable due to using components that cost less than the sum of its parts.
Second, Nintendo games look very good without the need for bleeding edge tech due to the color palette, art design and simplicity. Releasing an overpowered console would unnecessarily add to the price and Dev time.

Could Nintendo thrive once more? I think so. They need to stop being as arrogant as a company though and realize the flaws in their decision making.

Make the controller user friendly. If you want to make it unique that's fine (a la N64) but please don't go nuts with it.
Start getting creative with new IP. Bring attention to your console by targeting older demographics that can actually pay for your console. Most grown ups look at the lineup and it's just not as appealing as it was to our younger selves.
Overhaul the online infrastructure. I'm not saying charge for it but give it standard features we've come to expect. Splatoon could be so much more if it had voice chat, 8v8 and a bigger realized scope of action. Keep that in mind for other games. Let us properly communicate with each other.
Don't go head to head with the other guys. Build up your momentum this next gen, gain goodwill and go from there.
Give the gamers what they want!!! Why haven't we seen an mmorpg first person Pokemon game on console? That should've been a priority. Where's metroid? Why isn't mother 4 a thing? Put the breaks on Mario, make his releases meaningful and find a way to reinvigorate what made him so special. Outside of the current fan base, many of us find him repetitive. Change that, please. Maybe a console only Mario/Luigi RPG in the vein of the superstar saga series?