But what if it flops?

I actually looked at Rhythm Heaven before I made my post. It was very lop-sided in Japan. It did well enough in the West, but it would be a fringe qualifier imo.

@ bolded, these sold to the casual audiences of the Wii and DS. Those audiences have moved to smartphones and tablets as evidenced by the much lower sales of the new iterations. Not sure why you'd bring them up when the picture was obviously portraying a more traditional gamer who wouldn't be interested in Nintendogs or Brain Age. Also, did tomodachi collection ever make it to the US? I never thought it did. 

Lastly, it's not that new IPs are more popular, it's that people want more balance out of the big franchises they love and new experiences to enjoy. There is no reason for Nintendo not to have the capabilities to produce more games. If they're unable to, they can use the million in reserves to contract out more games like Bayonetta 2 or purchases studios. That said, they do seem to mishandle some of their studios almost as bad as Sony does Team ICO (looking at you monolith soft).

All they need to do to make the Wii U relavent again is to release a full blown console version of pokemon

Nintendo has needed new IPs since 1996. But because consumers Bought their old, dated stuff and kept telling them how great all the old,dated, washed up stuff is they didn't have to make a change. Now that they're failing maybe they'll see the light. Hopefully...
I used to be a huge Nintendo fan. But then I realized that I was going up and they weren't. One thing that gets me is that people are so nostalgic about their games that they just leave every element out and say "Well, it's fun". Well yeah, sure, many games are fun but sometimes people just want something more.

I think it would be a decent idea if Nintendo made some low cost investments to boost their portfolio.

Agreeing to fund 6-7 promising looking indie games would be a good idea in exchange for exclusivity and IP ownership of those games. Hopefully Nintendo is willing to broaden their horizons and work with Western devs here.

Financing some old school IP like Castlevania, Contra, Megaman, Outrun as exclusives on 3DS and Wii U wouldn't be a bad idea either IMO.

Xenoblade is meant to be a seperate IP period. The creators of the game said so themselves. 

http://andriasang.com/comhbl/xenoblade_preview/

It's not a new entry in that fabled PlayStation series, though. Xenoblade director Tetsuya Takahashi made this clear in an interview in this week's Famitsu.

"The world setting, story and other elements have no relation," explained Takahashi on connections to past Xeno games. "It's a completely new title."

Yes the title is meant to be sort of a tribute, but the actual games is not considered to be part of the Xenosaga series. Thus by all intent and purposes, it is a new IP. 

I don't think it matters whether the sales come from Japan or the West in this context, and if it did, the same argument could be used the other way around for other IPs that are of little relevance in Japan. What matters for Nintendo here is profit, and the taste of Japanese gamers (and those of us who tend to agree with them in the West) is just as much valid as the rest. As for Tomodachi Collection, no, it hasn't been localized for the West. There's been some talk about it if I remember correctly, but nothing more than that. I still think it counts though, for the reasons I stated.

As for the whole "casual" and "core/hardcore" thing, I don't classify games in those terms, and I only use them ocasionally to discuss these topics with others... It's a long discussion in itself, but I'll just state here that I see them as ambiguous labels without much point to them. Labels that don't take into account the different types of games and demographics that exist within them, as well as how they overlap and/or separate from each other. For example, how JRPGs and FPSs are clearly aimed at different audiences, yet are both lumped together under the "core" or "hardcore" labels. Or how people can enjoy both despite of this. Or enjoy both "casual" and "hardcore" games. I mention this so you know where I'm coming from. Keep in mind that I already disagreed with the OP regarding what type of games Nintendo should pursue.

Now, there's indeed a valid point to be made here about how these IPs are selling much less than on DS/Wii, but that doesn't erase their former success. It would be akin to bringing up how the sales of Resistance have severely dropped as well, and then dismissing it with the same argument. And in the case of Nintendogs and Tomodachi Collection, they are still million sellers on 3DS, making them still relevant. Style Savvy is not there yet, but it's over 500k by now with an update coming to Japan, so it could still get there. And the Wii series is hard to measure considering how we're missing digital sales, but Wii Party is at least getting acceptable sales considering WiiU's situation. The future of the other 2 looks grim now, I'll concede that.     

As for your last paragraph, Nintendo already contracts external developers to work on their IPs or new ones regularly, and they will continue to do so. I don't think I need to give you the list here... And yet, whenever they get a Bayonetta 2, or a The Wonderful 101, or a The Last Story, there's always a group of people that mindlessly complain about them being there... Nintendo just can't win with some people... I agree that they could buy a few developers, but this should be carefully considered, not going on a buying spree. I say this because I think many people don't consider all the factors involved here. As for Monolith Soft, we'll have to agree to disagree there... >.< (NoA issues aside, which I already addressed)

LOL, Agree

Okay!

It is, still basically a new "IP".