They need to make a fusion handheld/console system.Next gen will probably be the last dedicated gen with physical games after that it will be digital only.

I'm all for sharing the same library and i also believe it would allow for creating new franchises and really diversifying their line-up to the likes of 3rd party games.
I just don't think there's really appeal for something in between the mobile market and traditional home consoles.

Again, Google and Amazon didn't fail to set the world on fire because of bad luck.
I took a look at the Amazon Fire thingie and that is more than just a console, it's almost a media center and actually looks pretty cool.

But the point is, in terms of games - what it's actually trying to sell - what it offers, people can experience it already on mobile devices.
If Nintendo decides to offer a micro-console less powerful than Wii U - or even as powerful if it would be possible at the time - the question is: why? What is appealing in that solution when people will have a traditional next-gen console as an alternative.

Core gamers, the same ones Nintendo would want to attract with the ne franchises just wouldn't care because those same kind of experiences would be found on even better hardware, which would reinvigorate the home console market.
Nintendo needs to create 3rd party like games, as much as they need to evolve in terms of HW, so their own games can evolve and become better.
Think of Smash Wii U and how if Nintendo didn't improve the HW, we wouldn't get 8 players at once. That's the type of stuff that is only possible with new and better HW. A micro console as powerful as the Wii U just wouldn't cut it.
Not to mention that it would probably be equal in power as the next handheld, so the home console just wouldn't have a market for itself: same games, same looks. Why bother getting two of the same?

The better solution is different power levels that allow for sharing one library of games but also make sense for handheld and home console consumers.

And if you do a bundle with the handheld and just the home console, you can have a proposition of 400€/$, something that the market will easily accept.

Eh, even with microconsole components they could make something considerably more powerful than a Wii U, like I said two Apple A8 processors in a small box would likely outpace a Wii U fairly easily even today at about 10 watts power consumption or so.

Bump the RAM to 4GB too, you got a decent upgrade. Wii U games already look pretty nice, something that could run the same games at 1080p with even better image quality and say better lighting and textures wouldn't be bad at all really.

I think it's honestly either this approach (low cost, low risk mini-console) or going the megaconsole approach.

You can't go the middle route though, that will absolutely get you killed. I know some Nintendo fans think that a PS4-ish (maybe slightly better) Nintendo console for say fall 2017 or 2018 would work out well, but it's a crazy thought honestly.

PS4 and X1 will be approaching a combined userbase of 80-100 million by then with hundreds of games. Nintendo couldn't even keep up with a PS2 that had a 1 year/20 million headstart, there's no way Nintendo would even be competitive. Too little, too late.

It's either the micro/budget console approach that is reasonably powerful by its own merits (just not in a pissing match versus Sony/MS) and cheap or a megaconsole approach, where they would have to release something more along the lines of a Playstation 5, and ideally have a 2 year headstart (1 year headstarts as we've seen don't do a whole lot for Nintendo). This would be an expensive and riskier proposition for Nintendo with higher development costs.

The middle route of a "hey guys, it's our PS4, 3-4 years late!" won't work.

Unless they are sitting on another Wii-like controller miracle, which I doubt, those are basically the avenues left to them, my guess is they will take the microconsole/miniconsole approach. Even if it sells only about 20 million it would likely be nicely profitable for Nintendo.

They can throw in some gimmick controller from Miyamoto, just not one that's expensive to produce, but it can be suitably weird to be "innovative". Hopefully it means we actually get an F-Zero game next time around since it sounds like he won't allow one to be made unless there's some new control gimmick to go with it (I really hope Star Fox U is not done in by a lot of force fed "we gotta showcase the controller!" design thought). 

I think there's too much emphasis on a Micro console being for "mobile" gaming.

There is enough grunt in the new mobile chips that by the time Nintendo release their next system, a micro console would be perfectly capable of delivering a comprehensive home console experience for their games. Look at games like Freedom Wars and that's running on 3 year old hardware. Mobile hardware has come on leaps and bounds since the Vita.

There would be no need for a microconsole to mean small mobile experiences. However, there would also be no need for Nintendo to deliver a cutting edge state of the art box. I'm more than happy with Nintendo's output on Wii U, I think the hardware is held back by a hugely prohibitive cost of entry compared with it's predecessor. Nintendo's next console needs to have a much friendlier cost of entry.

Yup you nailed it. 

Two Apple A8's in a box would outpace a PS3/Wii U/360 easily, if you put three in a box (still a very low 15 watts power consumption, that's lower any Nintendo console since the N64), it would absolutely demolish a Wii U on performance. There's more than enough horsepower here to make a mindblowing Mario Galaxy 3 that looks better than Mario 3D World and runs at a full 1080p or a huge Monster Hunter 5 or even a "realistic Zelda" with gorgeous visuals. 

That's just an example, obviously Nintendo would use a different chip, but even the A8, by 2016 will be a fairly dated piece of tech. 

And yeah it'd be cheap, it could start at $199 (or even $179) and scale down to $149.99 or less for the vast majority of its product cycle. Not bad. Way cheaper than where Nintendo is today. 

As long as they don't do something stupid with the controller again. I get that Miyamoto seems like he's itching to make another wacky controller, and that's fine honestly (as long as a Classic Controller is also an option), it just can't cost $100 again like the Wii U tablet does. I'd insist on a controller that costs no more than the Wiimote did back in 2006 max.