the thing is, i think you're looking at this as though this is a situation that's happening solely to nintendo.
no one still in the industry still making physical platforms sold more hardware than they did last gen. and no one is selling more hardware this generation than they did last gen.
it's a shrinking space, and instead of circling the wagons, nintendo would be better off securing their future in the very real and growing digital space. there's still room for hardware, and they can probably profit from it, but i think next gen will be a transition for most, and a last hurrah for others.
to be quite honest, what you suggest ignores many factors. aside from the obvious decrease in creative freedom and obvious decrease in the amount of money they would earn in software (coupled with the obvious increase in development cost going from 3ds/wii u development to ps4 or god forbid ps5 development), there's also no guarantee that their audience was secretly on the ps4 the entire time.