Doesn't have to be an evil plan, as ringo pointed out, all it takes is a bunch of people who think similarly

Brad at Stardock tried to make a compelling game before graphics which he admits  was a big mistake. Now he works on the artwork a lot earier in development. Artwork/graphics and ability to make a compelling games goes hand to hand more than most gamers realize or admit.

Okay, I'll give an example.

Say there are 10 million software units sold on "N"'s platform each year.  N gets $10 licensing fee from each one.  That's $100 million in revenue, with no cost-of-goods, or development costs, to get in the way of making a profit.

Say there are 10 software publishers, each selling 1 million software units, at $30 revenue (cost to retailers).  Removing the $10 licensing fee, and the cost of goods (lets say ~ $7, although I'm actually using an average c-o-g from DS games here.. I don't know what a Wii game is.. it might be a little cheaper), that yields $13 net (maximum) from each unit sold.  That's $13 million net total.  

Now you have to remove the development costs for EACH one of the titles sold in that group that sold 1 million units total.  If it was one game, and the average cost is $5 million to develop, you've got ~$8 million net profit.  If it was 2 games, at $5 million each, now you've got only $3 million profit... see where I'm going with this?

Nintendo has claimed that the Wii was WAY more titles (both in number made and number sold, but the number sold isn't as proportionately great as the number made is) for the Wii each year than the HDs do.. and that's true.  That's great for Nintendo, because that means more licensing money for them, but since the sales for individual titles aren't stellar, that's a horrid statistic for 3rd parties making the games.  

Individual titles do best when targetted at a specific demographic -- which is the crux of the problem with the Wii.  Who cares that a Wii game costs $5 million to develop, compared to a HD cost of $20 million, when the $20 million investment nets you 9 million unit sales on the two HD titles, and the $5 million nets 1.5 million unit sales on the Wii title, and at a lesser revenue per unit, to boot?  Each dollar spent on the HD consoles, in this example, nets 1.5x as much revenue (actually more like 2.0x, because the of the revenue per unit difference).

Every dollar spent on successful, demographically targetted games performs better.  Plain and simple.

EDIT: By the way, the shovelware titles bring the Wii development average way down.  The cost of making games, like the ones Reggie wants, is probably closer to half what the HD version costs.

Individual titles do best when targetted at a specific demographic.

Individual titles do best when targetted at a specific demographic -- which is the crux of the problem with the Wii.  Who cares that a Wii game costs $5 million to develop, compared to a HD cost of $20 million, when the $20 million investment nets you 9 million unit sales on the two HD titles, and the $5 million nets 1.5 million unit sales on the Wii title, and at a lesser revenue per unit, to boot?  Each dollar spent on the HD consoles, in this example, nets 1.5x as much revenue (actually more like 2.0x, because the of the revenue per unit difference).

"Every dollar spent on successful, demographically targetted games performs better.  Plain and simple."

"EDIT: By the way, the shovelware titles bring the Wii development average way down.  The cost of making games, like the ones Reggie wants, is probably closer to half what the HD version costs."

Even if that's true than games that sell close to the amount of Xbox360 titles are not profitable as the 13$ to make games goes to 26$ and Xbox360 games cost only 10$ more to buy. Moreover no thrid parties on the Xbox 360 or PS3 have sold 9 million copies. Only sequels to established franchises are selling on those systems. Exactly the types of games Nintendo wants on Wii systems. In fact Mario and Sonic at the Olympic games has more sales than All 360 games but 3. Guitar Hero sells more copies on the Wii than on HD systems. A lot of the hard core titles that sell alot are made by Activision selling Call of Duty reshashes and Microsoft with Halo and Gears of War.

http://vgchartz.com/worldtotals.php?name=&console=Wii&publisher=&genre=&minSales=0&results=50&sort=Total

http://vgchartz.com/worldtotals.php?name=&console=X360&publisher=&genre=&minSales=0&results=50&sort=Total