Should Nintendo Stop Innovating And Make A Traditional Console?

[Soundwave]

Traditional consoles are just too much work for Nintendo as well. Look at pretty much all success home consoles (40 million or higher):

NES
SNES
Sega Genesis
Playstation
Playstation 2
Playstation 3
Wii
XBox 360
Playstation 4


8/9 of them have all the major third party developer support of their time or very close to all of it, XBox One will probably hit this threshold too so that would 9/10. The Wii is the only exception and that required a break through controller that completely changed everything and came with a completely untapped audience for its time.

Portable machines are much easier. You don't need as many games/genre types (lower attach rate) and you can get away with a more limited library scope. People just don't expect as much from a portable library.

For a home only console people expect a very wide gamut of content for differing situations or different moods they're in, Nintendo is not very good at catering to that post-SNES era. 

Sony and MS present too many problems for Nintendo because they're willing to spend a lot of money and Nintendo quite frankly was already having problems with Sega in the 16-bit days. Portable is just friendlier waters for Nintendo and people are more willing to accept more cartoony style games on portable screens, which favors Nintendo's library style. Console market is about big screen/edgier experiences these days, not so favorable for Nintendo. 

As Mr. Iwata even said, Nintendo is not very good at competing, which is crazy for a president to admit, but there it is.