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RolStoppable said:

I say "cartridges" because I neither expect optical media nor actual cartridges to be used, but rather a variant of SD cards. This seems like the most locigal choice for a range of devices that is supposed to play the same games. Mass production of such cards isn't overly expensive, plus they can work on both a home console and a handheld, unlike something like Blu-ray which is way too big in physical size for a portable device. If Nintendo's plan is supposed to work, they'll have to make it easy for consumers to buy games. A storage medium that works with any device is the most elegant solution and also allows stores to stock a wider range of games because there won't be boxes for two separate machines.

The storage capacity of such cards shouldn't be an issue, especially because most of Nintendo's Wii U games are still below 10GB and it's unlikely that Nintendo will push much further than they already have; their games simply do not demand an obscene amount of storage, plus investing in better graphics won't lead to an increase in sales that justifies said investment. Read speeds of the storage medium should also be pretty decent, so loading times should be in the acceptable range. Another minor advantage is less noise from the home console because it won't take as many fans to cool the device.

Since the home console and handheld of Nintendo's next gen won't be equally powerful, the games won't run in an identical manner on both devices, but rather access the appropriate assets, features and options depending on which device they are inserted. I am no tech wizard, but if physical PC games managed to have a range of different assets for the various settings (like mid, high, ultra) for the longest time, then Nintendo should be able to pull this off too.

How the big third party publishers' games fit into this strategy is of no concern because Nintendo doesn't plan with them in mind to begin with. The signs that many of them don't want to make games for Nintendo have been clear enough, so there's no point in taking their opinions into account whatsoever.

Bottom line: If optical media were the only viable future, then handhelds would use them too now. There isn't much that speaks against a return to "cartridges".

EDIT: Here's additional information on the production process, posted by Arkaign.

Arkaign said:
Okay people : a quick lesson for those who are somewhat uninformed on the subject of what makes cartridges tick!

(1)- I see a lot of people try to equate cost by using SD or other flash memory media as a reference point. This is exceedingly inaccurate, because flash memory is inherently different than : 

(2)- Mask Roms. This is what read-only mass-produced games are normally placed on with regards to video game console carts, be they old home consoles or handhelds. The process goes like this : 

First, the games exist entirely in a dev system on a hard drive. 
Then, the early prototypes are put onto EEPROM or other reprogrammable storage and tested on the target console or device
Last, when the greenlight is given, a mask rom master is made, and the entire run of carts is created using photo-lithography

Mask Roms are exceedingly cheap by volume. The master is very expensive to create compared to a single SD card or the like, but the further copies are minimal. Thing of it in simplified terms of an engraved plate that is used over and over on cheap regular paper to create high-quality prints. 

Whereas a 32GB or 64GB SD re-writable media might cost in the $$ range, a mask rom product in a medium-yield mid-size production number event is in the pennies range instead. The PCB and cart package itself along with the label and box easily equals the cost of the mask rom, or exceeds it. The other big advantage to mask rom products is durability. Where an EEPROM or flash memory device by nature degrades over time in a fairly aggressive manner by comparison, a mask rom can expect a very long lifespan, and a much tougher resistance to heat/cold/humidity conditions. As a non-rewritable etched piece of matter, it's non-volatile in nature. Its zeros and ones are hard engraved forever, or as long as the physical materials it exists on stays cohesive. In the right conditions, its entirely feasible that a mask-rom in it's little surface-mount package could exist for hundreds or even thousands of years. The other components on the cart assembly would degrade more rapidly. Plastic by oxidation, metallic contacts by rust, paper and ink on the label chemically unbonding and being leeched by humidity, etc. 

The reason that CD and then DVD replaced carts wasn't purely cost, it was technology itself. Technology has moved a long, LONG way since those optical standards were created. A return to carts for a physical media is actually pretty nice as an idea. Load times could be hugely improved, capacity would exceed non-specialty BD discs, and size (think a DS cart size) would be more convenient than a 5.25" or even Gamecube-size optical disc.

I think it's more likely they'll use disk for home console and cartridge for mobile.

UHD bluray's will coming out pretty soon so i think they should go with that for home console.

I think it would be much more likely that Nintendo would go for a cross install system so you can install your home console games on your mobile device by conecting them, and vice versa.