You're misunderstanding. Take a look at your own point #1. The hardware manufacturer makes significant money off royalties of third-party games. Scuttlebutt has it this is about $8 per copy, if memory serves.

Now, take Nintendo's software sales. Deduct the appropriate royalty fees from each copy they've sold, because they're now a third-party. In light of how they can make several games that sell 20 million+ copies, with several more selling 10 million+ and a whole bunch selling over a million each, the savings are significant, to say the least. Mario Kart Wii alone would have earned Nintendo roughly $240 million less (grossly simplified for illustration purposes, of course) had it not been on a Nintendo console. Similar astronomical figures would apply to NSMB Wii, Wii Fit/+, Wii Sports Resort, etc.

So that's my point #3.

On a broader note, I think you're being far too quick to dismiss the amount of third-party software that does sell on Nintendo's systems. The data don't support the idea that third-party games don't sell on Nintendo systems. That might be what the meme says, and that might be what Pachter says, but that's not what the figures say. Until the end, the Wii was consistently moving a higher volume of third-party titles than the rival systems. Some may grouse about the type of software that was sold, or that Hardcore Franchise X sold seven or eight times more on rival systems, but for purposes of this financial discussion that amounts to a hill of beans; Casual Franchises A-W combined sold more copies than Hardcore Franchises X-Z, which in terms of third party royalty fees means the Casual Franchises brought in more money for the hardware developer.

Moving on, it's nice that Pachter is throwing out hypothetical figures with nothing to back them up. I, however, have a great deal of difficulty believing that the audience size would magically triple (even he only said "double."). You point out that this idea presumes there's zero overlap in console ownership, for example, but the idea also ignores that the disappearance of the Wii destroys over a third of the console market in a single swoop. And make no mistake: without Nintendo's exclusives, Nintendo consoles would be doing backflips to reach Gamecube figures. If the whining goes that first-party software sales on Nintendo systems is nearly half the total software moved, what makes you think the public will pay for expensive hardware that plays only some of the games they want? If Mario's on a PS3, why on Earth would I get a Wii U? Put alternatively, I don't think it's a coincidence that hardware developers have historically kept their first-party software exclusive to their own console. And expended considerable energy and treasure to acquire third-party exclusives.

Oh yeah, and you're also either expending Nintendo's already stretched development resources thinner by forcing them to port the games to different hardware architectures, or trusting third-parties to maintain Nintendo's reputation by not delivering technically shoddy ports.

To summarize: as the only existing hardware maker whose first-party software shifts a ludicrous amount of units, Nintendo is saving more money in unpaid royalties each console generation than the GDP of some third-world nations. They also currently rake in significant royalties from third-parties as it is. There is not a shred of evidence I can see to indicate that going multi-platform would actually triple, or even double, Nintendo's software sales, but we can infer from the data that doing so would very likely lead to a notable decline in Nintendo hardware sales.

Simply put, I'm not at all burdened to show that going multi-plat would lead to their games selling less. On the contrary, Michael Pachter has the burden of giving some evidence that going mutli-plat will actually double (and you, triple) Nintendo's software sales, and that it will not significantly damage Nintendo's bottom line in the form of reduced hardware sales, higher royalty costs, and an even bigger decrease in third-party titles for its own systems.

So where are your figures to back that up? 

did anything like that drastic ever happen in the video game industry before?

They couldn't make such a deal (unless it was a matter of exclusivity) because they would be at Sony and Microsoft's mercy when it came to releasing console games. That's the reason why there's money in being a manufacturer; you control the gateways of distribution and make those royalty fees.

When Nintendo's hardware base is too insignificant to merit continuation, that also means that the strength of their software has declined to reflect that, which would mean they'd be in too weak of a position to do much as a third party in the first place. In the meantime, they'd have to trade off revenue from peripherals, the online shop, royalty-free first-party software, third party royalties, and actual hardware income, in exchange for *maybe* getting more software sales for Nintendo-published games only.

I know, it's getting out of hand. Sure having a massive dig against a console is silly for no reason but the Wii-U is obviously in dire straights at the moment and to comment on that looking to the future based on what we know now is hardly heracy, but from the replies here one would think the OP is some kind of witch spreading evil curses around.

:)

That made me laugh!  Thank God some people here are sensible.  I got a Vita at launch, and when Vita is doomed threads popped up half way through 2012 I didn't jump on here and defend it like my child. I mean the Vita was (And still is) in big trouble, and I never denied that and acted like it would be fine.

 I was worried!  But it seems price cuts and games will make the difference, so now I can rest easy.  Also the PS4 will use it a ton so I know it isn't a total loss either way.

However the Wii U is doing even worse, and it seems third parties have abandoned ship and price cuts are not helping!  This is NOT GOOD!

Games didn't sell Game Cube and N64. I don't know how many you expect the U to sell but if it's at SNES or NES levels you are going to be dissapointed.

As for profit? Ps3 lost money... they lost more money because they didn't sell as many as they wanted to... they lost even more money after that because they cut price sooner then they wanted to. Wii U is in the same boat. This is the first time Nintendo sold a console at launch and they definatly aren't selling nearly as much as they expected to sell (probably will miss their initial projection by 35%) and retailers and publishers are calling them out for a price cut.

That made me laugh!  Thank God some people here are sensible.  I got a Vita at launch, and when Vita is doomed threads popped up half way through 2012 I didn't jump on here and defend it like my child. I mean the Vita was (And still is) in big trouble, and I never denied that and acted like it would be fine.

 I was worried!  But it seems price cuts and games will make the difference, so now I can rest easy.  Also the PS4 will use it a ton so I know it isn't a total loss either way.

However the Wii U is doing even worse, and it seems third parties have abandoned ship and price cuts are not helping!  This is NOT GOOD!

And you see no hypocrisy, none at all, in declaring that there's no way for the Wii U to turn around?

And you see no hypocrisy, none at all, in declaring that there's no way for the Wii U to turn around?