Re: part of it is about price I think
Personally, for me, it's more like £200 = a shedload of games on my existing PC.
I don't see handheld gaming as anything more than a short timewaster on the train, or for kids. But now kids tend to have "their own" laptop, of some fashion, or you have a phone for those half-hour journeys that not only plays games but connects to t'Internet too.
I don't think I can seriously consider a gaming console until it's under £100 any more. My Wii wasn't, and I bought it brand-new. And I got a Linux-based handheld gaming machine (the GP2X) for much less than that several years ago that's still doing just fine and runs more than any commercial console ever could via emulation of older systems. £100 is a lot of money. That's multiple trips to the cinema, half-a-dozen full-price DVD's or PC games, two or three "blockbuster" title video games, enough petrol to get my car from London to Scotland, etc.
I don't see that it really compares well to say that yet-another-iteration of a top handheld console (without some of the essential gadgets or any really sizeable library of games to play on it) costs twice that. Granted, there are different use cases, but I can get a half-decent laptop by the time you've kitted out a new DS with a couple of games the seemingly-"vital" second analogue stick, power adaptors, cases, etc. Hell, my employers saw an Android tablet that I bought my mum and was so impressed they bought me one for work and I could *easily* get 2 or maybe even 3 of those for the price of this console (or one loaded to the rafters with pay-for games and apps). My phone didn't even cost that and it does a whole lot more, just without the fancy 3D effects (Have they died yet? Can we forget about them again and resurrect them in 20+ years like we normally do?).
I think Nintendo are very business-savvy, but I don't think they are in a growth market any more. Casual games are too prolific, "serious" games are too powerful and expensive, the middle ground is being pushed by all sides on all manner of platforms.
I own a Wii because it's a cool, cheap little thing to pull out when friends are over for ten minutes and they''re not particularly gamers but want to relax and have a laugh (but, saying that, we choose to play an 1970's board game last time they were over). I haven't owned anything "console" prior to that since, well, probably the Super Nintendo when I was a kid. Yet I play hundreds of hours of games - sometimes too much - and we're not talking AAA titles at all, or ancient things from old platforms that nobody's ever heard of, just some cheap, fun games to entertain.
£200 is a lot of money and always has been. If you don't think you'll get that value back (i.e. you already own a DS of some kind, etc.) then it's probably not something you'd be interested in. The Wii, you get your money's-worth in entertainment (at least, virtually everyone did). To me, though, that should be a GUARANTEED 200+ hours of entertainment even if I just buy stuff I already have on Steam wishlists and the like. Yeah, I'd pick up a lot of dross too, most likely, but the pricing would mean that it wouldn't matter - I'd still get my value out of the money. I don't see me getting that out of the DS and one game, personally. And even if I did, it was a hell of a risk to hope it would happen with one particular game.