I agree with the OP. I think Nintendo will continue to shun 3rd party AAA developers, and will pay the price.
We already see Nintendo fans upset because of lack of future vision for WiiU, and I doubt that NX will be able to attract anybody outside the existing fanbase. If those current fans start jumping ship, there will be very few people left willing to take a gamble with NX.
I see Nintendo in 2018 as a 3rd party software developer, with a strong focus on mobile (like most Japanese developers today), and a strong complementary toy business.

Yes, people that bought a Wii disappeared. Most of them never had much interest in gaming anyway, and if they are gaming now it's by swiping or tilting their mobile device. People who bought handhelds steadily are declining even more steadily, with Nintendo basically having such luck to be able to sell small updated devices to the same people every few years. The next handheld will do even worse than 3DS (if 3DS did 50% of DS, next one will do 50% of 3DS numbers at most).

Without 3rd party hit games, Nintendo has no chance in appealing to a broader base. We already see that 10 million is the best case scenario for home consoles (number of Nintendo fans willing to play only those games), and by giving up support barely 3 years into the generation, Nintendo is certainly not making new fans any time soon. To think that those 10 million people will be willing to buy the next console so that they can be sold Mario, Zelda and Smash again is not realistic.

Nintendo has steadily refused to move into the 21st century, and that is the reason they are being left behind in the modern gaming environment.

oh I see now what the disconnect was. I did not explain WHY it will probably fail (or at least the console portion of it).

1. Killing the WiiU early (which I think the poor showing at E3 is a foreshadowing of) will put a bad taste in consumers mouths. I personally dont trust Nintendo anymore.

2. It will be launching in 2016 or 17, right into the prime of the XB1 and PS4. Against FF VII remake, Against Shemue 3, Against Elder Scrolls 6, against GT7, against all typical annual titles that likely will not be available on the NX, FF XV, Dragon Quest, KH, GTA6, TLOU2, Horizon, and many many more.  Even if Nintendo offers all of its top tier franchises in the 1st year it cant top that.

3. People still love Nintendo, but 3rd parties are king now. I personally dont believe that they can carry a console on their own like they did with the N64 and less successfully with the GC. They seem to have no relasionships these days with 3rd parties. Had the Gamecube had better branding, and launched with Spaceworld 2000 Zelda, Mario 128, Mario Kart and SSB:M it would have made a massive difference in 2001. In 2016 or 17 it would still help, but it wont it wont be enough to propel it for long (because after the initial blitz they dont have the 3rd party support to compete, and even if it does much better than anyone could predict it would take years for 3rd parties to finally drop big titles on it).

Its possible they could find lightning in a bottle again like they did with the Wii, I just find the scenario in the OP more likely.

At best it will see GameCube like success, and with Nintendo already showing they are willing to find profit on other platforms (Mobile devices), I think they will look to find profit on other consoles.

NX will be a handheld. and while it wont be as succesfull as the 3DS it will still sell well. and it will support Amiibo's which are printing money for nintendo.

Of course not. There is a third type of gamers, but their number is not large enough to support a console.

And also, I cannot help if all you associate PS/XB with is violence. Perhaps you should sometime check out what they have to offer, you'd be pleasantly surprised.

Hate to repeat myself - There are other tastes and other markets, but they are not large enough to support a console. They are enough to support a great software developer, and that's what Nintendo should focus on.

Unless they can bring "violence" to NX, they don't need to bother. See, there is a reason why the majority of high-selling games on PS/XB are violent.

1. That was a shorter Gen to begin with(both Nintendo and MS flipped over the board game and said redo), and I agree if they can pull a Wii (lightning in a bottle) my whole theory goes out the window. But I also believe if the Wii had bombed Nintendo would have been making PS3 or 360 games by 2010. I recall comments about alluding to this from Iwata and Myamoto themselves (not the 3rd party part per se, but implying the Wii was a last shot, which is why they went bold... go bold or go home).

2. The WiiU is showing that they do. They just completely lost. If the did not complete against the PS4/XB1 the sales would look alot different, and if they are not competing, exactly who are they selling to? Whoever it is supposed to be is not buying their product.

3. This is not about handhelds and never was. I thought I even said they would continue on in the Handheld market. I think they go 3rd party on console games (or god forbid shift completely to handheld...)

70-80 million? Where do you get that number from? Like there is no overlap in users, and no users that double/triple dipped on 3DS?

Yes, I expect less. I expect handheld part to continue shrinking (as I stated already). I think that outside Nintendo core, majority of handheld buyers are children, that will be older by 2016-17 and will move onto more mature games (what you call "violent" games). There will be little influx of new blood, as they will be primarily getting started on mobile in increasing numbers.

But, there is a huge discrepancy in handheld and home console sales because most of the former just don't feel like spending a lot of money on systems. To think that people will be willing to spend money on a unified platform (I don't know what it would cost, more than $300 for sure) when all they want is a quick on-the-go game is unrealistic to me.

If anything, forcing people to buy a unified platform will just decrease the market. Imagine the PS4 sales if you had to buy it bundled with Vita for $500-550. And of course, to think that just because a game can be played on both NX devices will suddenly cause a huge increase in sales, I doubt it.

Sure, there is a market for it, but that market is shrinking so rapidly. For Nintendo to think that they can, in 2016/17, launch a new console relying only on its own software, and be successful at it, they are in for a rude awakening. I think NX will be a complete disaster.

See, that's the problem I see here. I understand the way that NX should work. Basically, it would have been the same as if WiiU and 3DS had a capability to play the same games.

So now, with what you say is NX, when it has that capability, you expect that those 3DS and WiiU sales will just add up. But in actuality, the numbers will get divided, as 50 million is the most users that nintendo has this generation. And those numbers will keep declining.

Then, my quandary is this? If NX is as you say it is, why would it be counted as one machine. Won't it just be two separate machines, sold separately, just sharing the library? It just doesn't add up to me at all.

But, regardless of the technology and the specifications, I still believe that the entire NX project will live and die on the software level, and with AAA 3rd party completely uninterested in Nintendo, it will have no future. As is evident by the 25 year long decline of Nintendo's home consoles (interrupted by a short-lived mega-fad), less and less people are willing to limit themselves to just one entertainer, people's tastes have changed, and they demand a variety of choices that Nintendo consoles simply cannot offer to them.