This the "have your cake and eat it too" problem. Basically saying why can't nintendo release cutting edge hardware and sell it for cheap as well? I don't think that is possible. This is the YYOD and RROD generation. I don't think it is ever a wise decision to release a fragile console or sell it at a significant loss in the hopes that it will catch on.
Another thing to notice about the hardware is that Nintendo left a component cable port on the Wuu console because they know people still have SD tvs. This further reduced the barrier of entry. It was a wise move, they even went as far as including a HDMI cable. They clearly know who they are selling to. They are selling to people who bought the wii.
Also the wii was not only sold on the motion controls, it had alot of other things going for it;
- cheap (still cheaper than the ps/360 at launch and even now),
- almost perfectly backwards compatibile (discs, controllers, memory cards);
- compact, quiet, white, slot loading
All these things plus easy to setup motion controls made it so that virtually anyone could waggle without needing a degree.
I think you don't get his argument, on technical level the design choices look "iffy". It is not a matter of shipping a more expansive product but a better one. If you think that the WiiU is best design wrt its BOM it is fine, the whole point is that neither me nor Shifty nor more educated people think that is the case.
Whether it is bothering for Nintendo own software is another matter.
Wrt to failure rate, I do agree that MSFT and Sony might have pushed a bit too far which also resulted in a way too long generation, complains from major editors, etc. (actually Ubisoft just declared that they hope that next gen doesn't last that along). The ps360 was a bit on the big side too, I agree with that, quiet invasive in a living room, etc.
But the issue is that Nintendo's goals are a bit unclear, they communicated on "core" games quiet a lot, ME3, CoD. They try to appeal to core gamers, core gamers read the press and may not be ok with games that dive in the 20 FPS range on a significant basis and feel like they are down grading more than up grading. They may move for the sake of exclusive but that another matter.
Point is the WiiU didn't deliver, not because of its BOM, but because it looks ill designed and 12 years after the Gamecube release it seems that Nintendo has not spend a penny to handle BC with that generation of product (GC/Wii) through software.
I would sum up like this:
*Will Nintendo manage to reach its fan base: Yes
*Will Nintendo reach the young gamers: Yes, though they better have good wiimote games out on the system and fast, so young "wii dancers" are asking their parents to upgrade that good old Wii. I don't think the Wiiumote provides enough value for that demographic, they have to leverage existing peripheral (and that applies to the next group). I also think that the price is still a bit high, 250$ was perfect for kid and occasional family uses.
*Will they reach other people that rallied the brand though the WiiU (so none of the aforementioned group): for now I would say mostly no (no titles leveraging existing peripheral, and kinect is a strong competition for fitness games, etc.).
* Will Nintendo gather core gamers they lost a while ago: now.
To me it looks like a shrinking of their potential targets.
I would say that on hardware alone Nintendo failed to get some core gamers on board, and that they also failed to push a software line up that would have leverage all of the Wii strength and what appealed to its user base (motion controls). I love the Wiiumote concept but they should have pushed at the detriment of their existing motion control technology even though that would have mean pushing games that doesn't use the new pad in any way. Whether or not it promotes the new pad, I think a new Wii sport and a good dancing game may have done them quiet some good in the kid demographic.
They are failing to present the product in a consistent way, for the sake of promoting the new system capability, they are imo not selling the device as a "Wii2".