I've described this issue before. After 20 years of being known as not the destination to go to in order to buy the major third party hits, Nintendo would have to make a herculean effort to make third party support worthwhile. Otherwise you get stuck in the "third parties put up half-hearted effort because they believe it won't sell well, it doesn't sell well, third parties give up," cycle. There's no good reason for third parties to expect sales, so they put in little effort when they bother at all, get the natural outcome from that, and stop bothering subsequently.

How do you reverse this cycle? Moneyhat *just* to have the games show up on your platform? It could work, but to little benefit to Nintendo because buyers of Call of Duty or Street Fighter are trained to go elsewhere. Just because Nintendo pays to have them make Call of Duty, and even pays to make sure that Call of Duty has all of the features of the other platforms, how much will it do?

And that's disregarding how opponents could counter-moneyhat, as they've proven full willing to play ball in that matter.

So to make a *difference*, Nintendo would have to moneyhat EXCLUSIVITY for several key franchises across a number of different genres. They'd have to ante up significantly, to guarantee that people who like those games would have to buy a Nintendo console to play them on.

And then we're looking at something that isn't worth the effort, especially as Sony and Microsoft would go that much further to prevent such a thing from happening.

It's a dead end.

If by casual you mean 'Select' or 'Niche' market in a sense where their games only support a certain crowd, then yes.

I don't think most Nintendo games are that casual and I wouldn't' describe the core Nintendo fan base as casual.

They have niche games and popular games, they have hard games and easy games. Some of their big franchise, like MK and smash, are easy and accessible to get into but have plenty of depth to master.

Just to be clear, I'm not saying that challenging Sony and Microsoft is the only way or even the best way.  There is nothing wrong with being niche if your market can support you.  If Nintendo learns from what went wrong with the Wii U, I think they could be back to making money at launch next gen.  The real difficulty would be convincing fans that being "third place" is not that big a deal.

However, I do think Nintendo could, in theory, climb back into the race if they were serious enough.  That would mean spending a lot of money and hiring people who understand how to take advantage of a global market.  I'm not talking about moneyhatting, either, at least not as a primary mechanism of change, but rather investing in an infrastructure of first party studios across the globe.  I have no doubt this can be done.  Remember that when Sony first joined the console market, they had no internal studios.  They had to start from zero in order to field their own first party exclusives, be it building from scratch, acquiring promising developers, or forming partnerships.  World Wide Studios is a good template.

Let's imagine they formed a separate division from "Nintendo", an umbrella group like WWS that housed several different studios, all of them markedly different from what people think of as "Nintendo".  Let's call it "N-Dark Studios".  Here you'd have your Platinums, Monoliths, Valhallas, Media Molecules, Naughty Dogs, and other such developers, all wholly owned by Nintendo but marketed under a different label.  They could use the works from these studios to redefine what it means to own a Nintendo console.

Really, if you think about it, what did buying Bayonetta 2 really change?  It's just a game.  Could easily have been a token gesture in the minds of third-party developers.  But when you buy or form a studio, then you're showing a commitment, you're showing that the ecosystem of your platform is going to grow.  I think they could win back third-party support if they demonstrated that they were dead serious about diversity.  Imagine if they launched a console, not just with a Mario, but also with a Halo and a Gran Turismo right along side it.

I don't think they could win back third party support in any significant way, though they could get a few significant games on board that would complement that expanded first party support.

The other component i think of is hunting for the best mobile games and getting those ported, either as eShop or retail titles depending on the appropriateness of it. With Nintendo's focus on non-traditional controls and the vast, untapped potential out in the hordes of mobile developers, that would be the best way to get a diversity of support and set themselves apart from the crowd, along with the "expand internal capacity" strategy you mentioned.

I don't really think Nintendo would need to do a different label, though.

Nothing screams more casual to me than PS4/XB1 im afraid. As a gamer, Wii U has hell of a lot more content that excites me.

The main question then might be, what is 'core' and 'casual'. One important thing is, that you can play Mario Kart and Call of Duty pretty casual and both can be a total core experience, espacially online. Then there's Assassin's Creed. Played it to Black Flag, but the first civilisation and assassins parts started do bore me, without those pirates and ships i probably would never have bought it and think i wont buy anymore AC's.
Assassins Creed is actually pretty much casual.
I would not define casual by genre. So if someone says that's kidfriendly so casual, he might see Wii U as a casual console. That's not my point of view.

As for games, Nintendo might need along with games they already have, i'd like to see them make stuff like F-Zero, Wave Race and Metroid Prime again and i'd also like them to do more new things, even games for a more mature audience. But that shouldn't be a copy of GT/Forza or Gears/the Order.
No one needs a third company that is doing the same.