You've done it now, you've called out Ho Nam and his boys. For the honor of Hung Hing, I've got no choice but to come out from hiding and make a post. Never thought this day would come.
This may be my first wall. But I have no choice. This is a topic that hits very close to home for me. The effect of piracy on consoles, and the eradication of loss leader hardware sales trend by Nintendo.
First of all you are partly right, there was once and era when Console manufacturers derived their entire business motto on software Royalty, and would gladly take huge losses in selling loss leader consoles to generate a massive userbase to generate massive software royalties. But sadly thanks to Nintendo, this era is gone.
From the onset of the Wii into the console wars, Nintendo became the poster child for the new generation of the console business, where by hardware sales actually generate massive profit and this motto has migrated over to this current gen, where both Sony and MS opted to release inferior hardware barely able to push 1080p nevermind 4K or anything remotely next gen in order to profit in hardware sales. Since Wii, console manufacturers have given up the loss leader motto and have adopted to Nintendo's hardware sales motto of business, where-by multiple iterations of a single hardware line are designed to generate massive revenue on hardware sales. So, the days where consoles manufacturers lost money or barely break even on consoles sales are long past us, nowadays every console sold is money in the bank, which in turn result in poor hardware performance from one generation to another.
How does piracy play a role in all this? And why is that Nintendo is knowingly placing hackable firmware on New European units that are just entering the market? Simple, piracy helps increase userbase, and thus increases bottomline, and increase the console's marketability and store shelf space.
Wii, PSP, DS, 3DS all saw very early scene-homebrew penetration and it is not by sheer coincidence that all of these consoles saw very high market penetration.
You need look no further thand 3DS vs PS Vita. The Vita to this day has not been fully hacked, and it's measely little 9million userbase reflects that. 3DS with its whopping 48million userbase benefits from the it's early scene penetration (piracy). Like it or not, there are certain markets out there that are almost completely driven by piracy, and Nintendo knows this, and because they make money from hardware sales, they can even be said to embrace it.
At the end of the day, the only people hurt by piracy are the game developers whose entire business motto is driven by software sales. The console manufacturers especially Nintendo are not heavily effected since they've all adapted their business to be hardware driven since the last gen. Nintendo started this trend, and know how to work it better than anyone, it's no surprise that their consoles are always to first to be hacked, and certainly no surprise that they will knowly release a exploitable firmware in a new territory.
End of wall.