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This is interesting actually, I didn't notice this yet. OP are you familiar with the blue ocean management strategy? I think you should take some time to read up on it. It's how Nintendo conducted themselves going into the Wii era, and I think it'll help better explain what you were trying to say.

I disagree that they knew that this would be the eventual outcome though, I think Nintendo wholeheartedly believed they could utilize the blue ocean strategy and keep a slice of the "hardcore gamer" market share. It was only until the Wii U that they realized their flaws which in turn led to the Switch. Great analysis though.