This is such a stupid business decision. Japanese businessmen just refusing to change their plans I guess?!?! First off I had never heard anywhere that this was just going to be a limited run, maybe they did say that when it launched but it seems most people were not aware of this. Even so, they obviously just thought it'd be a interesting little holiday pickup and not have huge interest, seeing as how the supply massively underestimated the demand. So Nintendo's answer to expecting to make a product with limited holiday interest and nothing else and ending up with a product with massive ongoing demand is to shut down production and refuse to make money??!!!
I get that they want to sell VC titles, but its not like everyone who buys a NES Classic is gonna go out and buy a Switch! So that argument makes no sense from a business perspective. The reason the NES Classic has such crazy demand is partially because its an actual physical mini NES so you feel like you're playing the original NES, and also because it costs $2 per game. If they had sold it for $150 ($5/game like VC) the demand would have been much much lower, as most people have no interest in paying those types of prices from scalpers now.
And many of the people who would pick up both a Classic and the Switch are probably the type of people who will by their favorite NES games on the Switch as well in order to play them on the go, so the loss in money from overlap in these two products is likely very low, while the direct loss in profits from discontinuing the Classic is likely hundred of millions of dollars. It's not gonna make or break the company, but why throw away profits AND piss off customers just because they made a product that was way more popular than they thought it would be. That'd not when you discontinue something, that's when you ramp up production and rake in the money!
The only possible reason that would make any sense would be that they don't physically have enough money to manufacture both the Classic and the Switch (and 3ds) at the same time, but to me that just seems unlikely. And if that were the case why would they not say hey we are temporarily stopping production in order to focus on the Switch but we'll bring back this super hot product by say next holidays to satisfy are consumer base.
I mean they could make gobs of money selling millions and millions of NES, SNES, and N64 classics each. Then more money for selling additional controllers especially for 4 player N64.
Nintendo hates money. The dumbest business decision I've heard of by any company in quite some time.