2011 - 2012 isn't really that dire for Wii, particularly for a system in year three and four of its decline phase. Seriously - Wii is still beating PS3 / X360 individually this year and they're peaking while Wii is already nearly 9m off its best pace. Given how much lower the X360 / PS3 sw & hw peaks were vs. Wii, you'd expect them to decline more quickly, as even when seen as a combined market development costs mean the number of profitable games is about equal to Wii...the difference is X360 / PS3 aren't the same thing - one will fall quicker than the other - and that erode the HD market quickly.
The third party market is still set to be 75m-90m units on Wii this fiscal year now that Nintendo's top game output is slowing to 30-40% of sales for non-bundled games (still about 50% overall with bundles). As long as the third party market is above 30m units or so Wii won't collapse, and so we're anywhere from two to four years from Wii hardware falling off a cliff, as even with 20-40% declines (and Nintendo only expects a 25% decline this year for sw). Wii isn't N64 or GC or even SNES - companies are going to keep supporting Wii fairly well for at least seven Christmas seasons, as opposed to N64 which was pretty much over after Christmas five, or GC which was all but done after Christmas four. Third party market has gone something like this on Wii:
FY 3/2007 - 12m or so
FY 3/2008 - 55m or so
FY 3/2009 - 100m or so
FY 3/2010 - 95m or so
FY 3/2011 - 82m or so
FY 3/2012 Est - 60m ?
FY 3/2013 Est - 35m ?
FY 3/2014 Est - 20m ?
For the west I figure the plan is something like this:
New Games in 2011-2012:
Pikmin 3, Mario Sports Mix, Mario & Sonic next, The Legend of Zelda: Skyward Sword, Dragon Quest X, Wii Relax, music, party, sports, dancing filler, couple core third party things, bring over some Japanese stuff.
Sales Pushes:
Price Cut to $150
Player's Choice for the 90 or however many games to top 1m on Wii
Lower third party royalties slightly
Continue riding evergreens (Just Dance 2, NSMB Wii, DKC, Wii Party, WSR, WF Mario Kart, and a couple others will continue performing well into 2011 and beyond)
In Japan over the next two years, its more like:
Pikmin, Zelda, Last Story, Wii Relax, Rhythm Heaven Wii, Dragon Quest X, other random projects / third party games
Continue riding ever greens (Wii Party, MK Wii, NSMB Wii, WSR, WF , DKC, etc)
Player's Choice
Lower third party royalties slightly.
Price Cut: April 2011, probably again in 2012
Moreover, towards the end of their lives, as still fairly big markets, the Wii and DS will be very profitable because of how little Nintendo will have to do - combine that with 3DS and the Super Wii launch in late 2012 and Nintendo is in a pretty strong launch and strategic position given that third party support should improve as GBA --> DS was a 400m unit benefit for third parties, while GC ---> Wii was a similar 400m - 600m improvement for third parties as a market.