The counter argument is that WiiU greatly disappointed Nintendo fans out of the gate as being a poor piece of hardware, overpriced and without a standout launch title like Zelda, and was completely unable to reach outside the core Nintendo audience - and he WiiU represented a contraction on the GC too.
Did this indicate a shrinking core Nintendo market, or simply that WiiU was just a bad product that failed to find an audience?
These are the same thing. Nintendo makes products that sometimes people buy when they like them. Not many liked the Wii U. 65 million so far liked the 3DS. Maybe ~200 million liked the Wii/DS.
The highest selling (non bundled) games on Wii and DS were Mario, Mario Kart, Animal Crossing, these games sold 30 million each, far more than any sku on PS3, 360, PS4, XO. Only maybe 20% were 'casual' things like Brain training and Wii Fit.
you haven't really made a case for an extended audience buying in yet as those sales could easily be largely confined to traditional Nintendo buyers.
What is a traditional Nintendo buyer? You have to explain what that is. What 'tradition' do they follow? Are they the same consumers getting older? A demographic? I'd say there are maybe only 5 million who buy stuff just because it is Nintendo. Even the Wii U has millions of buyers who didn't get Mario Kart and Smash and Mario and Splatoon etc, just Just Dance and kids with Cars 3 etc.
But there are clearly 100-200 million+ (Wii and DS audience) who may be interested in buying Nintendo if they like a particular product. Maybe they have a 'Nintendo tradition' of buying what they like, and not buying what they don't like.
I don't even think the incredibly consistent last 15 years of Pokemon sales are from any kind of 'traditional buyers', as the game is popular with kids who were not even alive for half the series history. A new audience is constantly being built while some others drop off.