I AM JOHN! said:
The answer is simple: Nintendo cannibalizes the market on their system and makes it obscenely difficult for a third-party game to do well. They always have and they always will.
The answer is simpler: Unaccustomed to developing heavily for Nintendo systems, 3rd parties saw what Nintendo did and then did it, but cheaply. And when I say 'cheaply,' I mean not only in terms of budget but in terms of quality as well. They decided to largely ignore putting any traditional games on the thing and felt it required they massively shift their development style in order to compete on. This fed the market mostly worthless shit and failed to grow it adequately for their future efforts. Gamers who grabbed the thing were later faced with a drought and bailed; some selling the thing, some going on message boards and discussing their failures in domestic cleaning.
The truth of the matter is this: The problem with the Wii's market is due to 3rd parties imagining that a Nintendo console is somehow completely different from any other; imagining that, like Malstrom envisions, that if you aren't doing something disruptive on the thing, you aren't doing it right. This is mostly bullshit. Markets aren't born overnight, they're grown. And in this instance, 3rd parties grew the market in a direction that made their success and impact on the system's installbase scant.
The Wii market was not manufactured by Nintendo. Sure, they released some 'casual' games but it's not as if they stopped developing their more traditional offerings. Hell, they released more in the first year and half than they have in recent memory. They bombshelled the thing with content, from new age to traditional, meanwhile 3rd parties bought into a lot of hyperbolic bullshit stereotypes that have existed since the N64 failed to take down Sony.
In essence, they bought into their own (and others') nonsense when, in truth, there is absolutely no reason why traditional games cannot exist on the system and be very successful - so long as you don't burn bridges. The 3rd parties' wake is filled with smoldering ruins of bridge after bridge. Whether Nintendo or others (who aren't short-sighted) can shift the machine's direction is up to debate.
Personally, I'm thinking yes, but it will never achieve the level of profitability for 3rd parties as it might have had they simply treated it like any other system - and not a Nintendo one.