I think predictions that console gaming is going away have been around for.... as long as consoles have been on the market. Lets not forget out of the "big 3" in the market today, Nintendo is the oldest company, and the oldest video game company still in the hardware game.
An observation: What I find fascinating, is that Sony and Microsoft are effectively selling PCs today, with essentially "N64" controllers (generally iterations on that formula, and theres nothing wrong with that). The one advantage that consoles had/have over PCs is the fact that the specs are nailed down for consumers and developers for ~5 years. So Sony and Microsoft have been able to shift away from more exotic hardware(processors, RAM, CPU, storage) to "off the shelf" components and still retain that advantage. (If they release upgraded hardware mid-cycle, or even after every 4/5 years....are they still in the hardware console biz? or just in the rebranded PC as a console biz?)
Game developers(third parties) are a funny bunch. When the Wii sold roughly as much as the PS3+XB360 (marketshare) and required a fraction of the development cost, they still didn't put their A-teams to work on the Wii. With the WiiU, I can understand that marketshare is an issue. But last gen we saw developers shun the Wii in favor for consoles with much smaller marketshare and much higher development costs. Is it just a coincidence that so many console developers and publishers disappeared last generation? (There were other factors at play as well not only the Wii/PS3/XB360; but im convinced that this "pig headedness" of devs towards the Wii contributed).
Nintendo has a stable of franchises comparable to what Disney has, and the ONLY reason people buy hardware is for the software. The WiiU, didn't have any (at least for me, and apparently for the wider market as well).
What can Nintendo do to improve its chances for success? IMHO...
1. Second parties. Foster closer relationships/partnerships, such as they had with Rare in the N64 days, Factor5 in the GCN days and Retro that they've had since the first Metroid Prime.
2. Get unique exclusives from third parties. Getting developers to "target" the Nintendo hardware first with some key titles, kinda like they did with Resident Evil 4(GCN) and Bayonetta2(WiiU). Get exclusivity for a fixed time, and make sure the publisher&dev cannot even hint at the game going cross platform during that exclusivity period.
3. Improve developer relations. They probably need to create a new team to liaison with the big developers to address issues they are having. They can also improve the development environment for indie devs like they started to do with the Wii (WiiWare).
4. Focus. I rewatched the 2006 Nintendo E3 keynote. And i saw focus. The WiiU reveal was too complicated and all over the place.... (tablet controller with every possible input, "asymmetric gameplay", mix controllers in play sessions, TiiWii(or whatever), use the gamepad as the primary screen, etc...) It almost seemed like they didn't know what to make, so they just put everything they could think into it, hoping something would stick. Their recent announcement of the "health" stuff and movies has me worried in this regard.
5. Better marketing than what they did with the WiiU. The name was a disaster with the wider public, the controller is overly complicated for the general public (The Wii simplified the controller, and i think that was part of why it appealed to the wider public; it sold itself).
Relatively minor suggestions:
-Iconic industrial design
-Under $300
-Bundled game
-One SKU (expandable with SDHC/USB if needed)
Cheers