In order for Nintendo to be better off as a software-only company, it would have to tripple its sales, plus another 20% to make up for licensing fees they are now charged (or not earning) on their own software.  Plus the usual 25%+ profit they usually make on hardware (Wii U was a abboration and a mistake).  So if you really think Nintendo could sell 110 million copies of MarioKart on PS + Xbox... yeah, OK, sure.  They would be lucky to see any increase... I would wager many titles would go down as they would no longer be looked at as "flagship" system titles (see Sonic, Crash, etc). And they would lose the synergy of bundles, of promotion of titles on boot screens, of hardware designed around their own games, etc.

If you're thinking they could make massive sales on Smartphones... sure, if they are willing to sell titles for a few bucks.  FYI, Nintendo made more money off 1 title, Animal Crossing New Leaf, last year than Rovio made as an entire company - including selling Angry Birds, one of the most successful multi-plat mobile titles ever.

As far as Sony goes, the Playstation brand hasn't made money since the launch of PS3.  However, they do take in a most of their revenue by being a hardware platform maker.  Their 1st party software business is small, but if they do return to profitability with PS4 it will because they are a platform holder making money off licenses on 3rd party sales.  Same as MS.  And same as Nintendo, despite their larger in-house games division.  There is a reason all of them are in this business.

(1) What I gather is that Nintendo is growing frustrated with trying to sell consoles. Aside from the Wii era they have been in tough with consoles for 15 years now and it's finally starting to burn them financially. 

(2) Truth is the market for a "family friendly" console simply isn't there anymore. The console market is driven by people who want something more along the lines of what Sony/MS offer, not Nintendo's model of basically a modernized N64 every gen.

(3) The Wii was just a freak success, not a sustainable business model in the long run.

(4) Maybe a Steam-meets-Netflix type service might be under consideration? One where the consumer doesn't have to pay for any hardware or just a moderate cost?

WiiU is done confirmed.

Having a revenue stream like ios and android eliminates then needing to build a user base, and they can instently sale to a user base of +Billion people.

Good post, but Nintendo is loosing money, and that is the bottom line.  Could they sell 110 million copies of Mario Kart on PS + Xbox (Android, PC, Steam OS, Ouya, iOS, OSX), probably not, but they aren't going to match their Wii sales of Mario Kart on Wii U either, Wii was a fluke.  A return to profitablity is important for Nintendo since they have no other (major) buisiness to fall back on like Microsoft & Sony do.

There is no question Nintendo needs to return to profitability, but you don't shed 2/3s of your business - your primary business - to do so.  You find out what is wrong and you fix it.  In the case of Nintendo, they launched a console that hasn't done well during its first year+.  They need to find a way to make it do well or design a new piece of hardware that can do better.  If I were running the company, I'd do both.  I'd spend reserve cash to buy up a couple publishers to bring in more exclusive software to move Wii U's, and I'd design new hardware that can compete both within the industry and against other entertainment platforms.  A powerful new gaming system that is third party friendly, an andoid tablet with exclusive Nintendo style and software and an android Nintendo phone with controls to play games.  I'd outsouce much of the chip design, but deveop a common OS and online network between the 3 devices and start a subscription service to play updated versions of classic games.  Some games could be played on the phone, some require the tablet and full on AAA titles would be only on the new home console.  A dedicated home gaming network among the devices could make for great multiplayer matches, but I digress and daydream...

There is no question Nintendo needs to return to profitability, but you don't shed 2/3s of your business - your primary business - to do so.  You find out what is wrong and you fix it.  In the case of Nintendo, they launched a console that hasn't done well during its first year+.  They need to find a way to make it do well or design a new piece of hardware that can do better.  If I were running the company, I'd do both.  I'd spend reserve cash to buy up a couple publishers to bring in more exclusive software to move Wii U's, and I'd design new hardware that can compete both within the industry and against other entertainment platforms.  A powerful new gaming system that is third party friendly, an andoid tablet with exclusive Nintendo style and software and an android Nintendo phone with controls to play games.  I'd outsouce much of the chip design, but deveop a common OS and online network between the 3 devices and start a subscription service to play updated versions of classic games.  Some games could be played on the phone, some require the tablet and full on AAA titles would be only on the new home console.  A dedicated home gaming network among the devices could make for great multiplayer matches, but I digress and daydream...

The Wii U has more casual/kids centric software published by Nintendo than even the Wii did in its first year

Year 1 Wii U

Wii Fit U
Nintendo Land
LEGO City
Wii Party U
Game & Wario
Sing Party
Wii Sports Club

Mario & Sonic Winter Olympics

Year 1 Wii

Wii Sports
Wii Play
Mario Party 7
Wario Ware Smooth Moves

If this isn't aimed at casual/family/kids audiences then I don't know what is.

The Wii actually had more "hardcore" games from Nintendo its first year in Zelda: Twilight Princess, Metroid Prime 3, Excitetruck, and Fire Emblem. Even the Mario games on the Wii U are clearly designed for the family audience crowd -- NSMBU and Mario 3D World moreso than Mario Galaxy which is more of a continuation of the "Nintendo epic" game philosophy from the N64/GCN days.