You are assuming that they aren't willing to adapt to make the service work. A company has to be willing to adapt whenever they develop a new business model. That is true for any new business model out there. But if they don't adapt or if they give up early, then yeah they are sunk.
If they stick it out a while and are willing to adapt, then there is a huge market out there.
And they will be offering the AAA game of third parties on their service for a lot less than those companies will have on the consoles?
duduspace11 "Well, since we are estimating costs, Pokemon Red/Blue did cost Nintendo about $50m to make back in 1996"
Mr Puggsly: "Hehe, I said good profit. You said big profit. Frankly, not losing money is what I meant by good. Don't get hung up on semantics"