This is something I have noticed about Nintendo. If they make their system just powerful enough to get some third party games, but make it to weak to play all third party games, they end up selling more of their own software on their system. With less competition from other developers, Nintendo makes more money and sells more games.

So Nintendo's strategy should be pissing off even more third party developers so that their own games have less competition? Royalties for third party sales are unimportant? Building up a hardware base faster with a more diverse library of software and less gaming droughts would make them less money?

More than well enough for people to want it. You might not personally like the idea of online gaming on data plans, but this isn't some new or revolutionary concept. It's been going on successfully and lucratively for years on mobile. Shooters. On a data plan. On mobile. For years. You're stuck on the idea that most people have this impenatrable standard for quality amongst games. They don't. They only care about good enough. 4G is good enough.

30fps is the accepted standard on consoles even though its objectively inferior to 60fps and higher, which is the bare minimum on PC. Why? Because nobody cares about that stuff. If it works well enough, they have historically gone for the most convenient option. Always. 4G works more than well enough. No one but gaming enthusiasts will ever notice the difference.

They can very easily switch to the Switch. People jumped 360's ship in droves when the PS4 dropped. All of their friends were on a platform that was still being supported with an installed base of 80m, and those people bought the completely different PS4 because it was newer and had good PR. Switch can easily be put in the same position, in fact the Switch is in an even better position since the PS4 and XBO have less than half the combined userbase that the PS360 had when the 8th generation consoles launched.

Brand loyalty and platform loyalty is not nearly as ironclad as you think it is. The Switch isn't the Wii and the Switch isn't the Wii U. They have as little effect on how the Switch will perform as the GCN had on the Wii. This isn't some insurmountable, herculean task. All it takes is something that's percieved as better to come along, and people will go there. Contrary to popular belief, the mainstream definition of "better" is "easier," not "stronger."