I think Nintendo can still come back next gen and be a contender...if they want to that is. They've essentially said they won't compete and want to do their own thing. But they can definitely appeal to a broader category than they do now. For example, I am constantly trying to persuade my gamer friends to buy a Wii U, and they all say the same thing: that they like Nintendo games, and know that they're high quality, but they are kind of tired of the same franchises from them, and that there isn't enough "mature" content coming from them. Sony, for example, makes platformers too. But they also invest in "mature" titles like God of War, Uncharted, etc. That's where the market is, for the most part. I've been told by many of these same friends that essentially, they'd buy a Wii U if they could get all the big third party games, mature titles, AND Nintendo games. But when the only thing a Nintendo console offers is, well, Nintendo games, then the value is just not there for more people. Not sure how representative of the overall potential market these people are, but it makes sense most would feel the same way.
If Nintendo can just realize that the way they're operating is not going to be good for future business, then ideally they could make a console future proof enough to contend with the competition in terms of power, and easy enough to program for 3rd party devs. But then again, Nintendo needs to cultivate an environment where 3rd party "mature" games can thrive. The more I think about it, the harder it seems for Nintendo to get out of this, but there's still potential. I don't know what the hell they're going to do next gen, but I can't wait to find out.