The cost concious casual gamers are content to game on their smartphones and tablets.
Smartphones and tablets are not good for games when you visit your parents for Christmas. You can't play Angry Birds with your kids on your phones. You can't get together with a group of friends and laugh your asses off while playing Smash Bros. or Mario Kart on your phones.
Oh, Nintendo's strategy is far from flawed. They won't do quite as well as they did with the Wii, but they know what they're doing.