It's that whole ludicrous cycle Nintendo has been going through for awhile now, even with the Wii-3rd parties say their games sell poorly, but they release shit or don't promote it. Nintendo systems have pretty much been systems you buy Nintendo games on and not much else since the N64 days. Even the DS didn't see a ton of 3rd party support and neither does the 3DS now even though it's so huge in Japan it's outpacing the Wii there and it's the top selling console here. I think at this rate the only way Nintendo would get back in serious competition for home consoles is if somebody else bowed out. There are outside factors at both MS and Sony that are pushing for that, but it's a small chance of happening at best.
I think either Sony or Microsoft is going to bow out. Here are the simple scenarios:
Sony: Xbone outsells PS4, Sony goes bankrupt. Sony is heavily banking on PS4 to prop up a lot of their failing businesses right now, and if it can't, well...yeah.
Microsoft: Given the circumstances surrounding Ballmer leaving and a new CEO incoming, due to the Xbox not raking in the cash as Microsoft wants it to/thinks it should, the new CEO would be likely to drop the brand if it's lagging behind PS4 sales through next holiday. The same goes for Surface.
Out of those two scenarios, given the current market, I think the Microsoft one is more realistic since new CEO's love love LOVE to drop dead weight, and the 2 nooses around Microsoft's neck right now are Surface and Xbox.
However, I don't really know what this "Steam Machine" business is going to do. I don't really think it's going to take off to be honest. It's just a linux-based PC at a console price/power, which is sorta half the reason people get gaming PC's (TEH GRAPHX!). The other reason being a combination of backwards compatibility and mod support (i.e. customization). Considering the market Valve has right now, I see very few people moving from either the Nintendo, Sony or Microsoft camp to one of those machines to make it viable long-term. They'd go with a Windows-based PC, unless of course Valve goes '

Windows, Steam is Linux/SOS exclusive now' which would be...interesting to watch.