Part of the problem is that Nintendo wouldn't take new storage methods seriously. Cartridges in the mid-late 90s? Mini DVDs? What? Why not go with a CD in the 90s, and DVD in the early-mid 2000s? Developers don't want to struggle with fitting games into a single cartridge or mini DVD, when the competition has formats that offer so much more.
Wii almost had it right, but then they made it underpowered and with small internal memory. Come on Nintendo, seriously? 512 MB of internal storage when the competition has 20-300 GB? Seriously? And to make it underpowered, instead relying on a gimmick for sales? Yeah, it sold very well, but it just wasn't sustainable like that. If you want to rely on a gimmick for sales, do that after you get a console that can stand up to the competition as a typical console without them. Then you should add a gimmick that won't detract from the console itself.
--
Zachnorn Everything = overrated.
http://img841.imageshack.us/img841/4503/qrcode857546.th.png