I think they have an effect even if they aren't massive system sellers. I think they help most with perceived value and keeping the console relevant in people's minds when Nintendo themselves can't provide a release a month. This first half of 2019 I think shows that. The only big new game from Nintendo was Yoshi until Mario Maker came out at the very end. Yet, it has been up YoY by a considerable margin. Some of that is no doubt Smash, but I think it's no coincidence that last year a similar situation resulted in a pronounced drop off while this year it sustained momentum nicely. Mortal Kombat reportedly saw strong sales and multiple other ports, remasters, and new releases filled out the schedule. These didn't lead to sales spikes, but they kept Switch relevant in the general consumer base's minds.
Basically, the problem PS5 and Scarlet will bring is not taking away massive system sellers, but rather the loss of those games will result in Switch being left out of the headlines for prolonged periods. PS5 and Scarlet will be the new hot thing and that will pull spotlight from the Switch. This is why I feel a Pro model would indeed be wise. It can encourage more ports, but more importantly it gets the Switch back to feeling more new fresh.
Those games that fill out the schedule don't have to be big current AAA blockbusters though, they can just as easily be stuff like Octopath or Cuphead.
Bet with Liquidlaser: I say PS5 and Xbox Series will sell more than 56 million combined by the end of 2023.