Honestly the competition isn't Sony and MS; it's Apple. iOS is already the #1 gaming platform, and it's only a matter of time before they get Apple TV right as a gaming console.
What are you getting this information from?
Not to mention that breaking things down on a per country basis is also important.
How is Nintendo going to compete against $0.99-$10 iOS games? It's going to be a long time before Apple TV is a
good gaming console, probably 10 years before they make hardware that's worthwhile. Nintendo should not try to compete with $0.99-9.99 casual smartphone games with a $199 home console. Where are you guys pulling these theories from?
A cheap $199 console and a good looking Mario game might be a way to get ahead.
Not a chance. Firstly, cheap and good looking games don't go together. For that Nintendo would not even need to design a new console. They could just drop the price of the
Wii U with Mario Kart 8 to $199 but that wouldn't even make a dent.
If they put competitive specs and pricing with Sony and MS it'd just get wasted.
If the NX is a common software platform that will unify the company's future home console, handheld devices and third-party smartphones, that would mean you can play the entire library of all their mobile/tablet/smartphone games on the NX home console. This key differentiating factor isn't possible on XB1/PS4. If the home and portable products use the same OS, there will be many games that play on the go and on the big screen with cross-buy and cross-play functionality. A single ID would allows users to carry their friends lists and purchases with them no matter what Nintendo machine they're on. Competing on price alone would not be a key differentiating factor XB1/PS4 because MS/Sony are going to release slim consoles and drop prices further over the next 12-18 months. So under no circumstances should Nintendo choose to compete primarily on price or they will fail automatically.
The NX handheld could be a separate and unique device that replaces the 3DS. With a unified OS, the NX home could directly stream games to the NX handheld in the same household. This takes the idea of the Wii U but doesn't force the expensive $150 controller down the throat of NX home console gamers who may have no interest in the NX handheld. This would allow the NX home console to shop with a traditional Nintendo Pro controller that gamers overall prefer over the Wii U's style tablet. It's also possible that the NX home would include the hardware of the Wii U to allow for full backwards compatibility. That would ensure that the NX has many of the most popular Wii U games to draw upon during the first 6-12 months of launch. By the time the NX home console launches, it shouldn't be very hard to have it priced between $200 and $300 with overall CPU/GPU horsepower between XB1 and PS4.
The weaker than XB1 hardware model would be way too risky I already mentioned since all MS/Sony would need to do is drop XB1 to $249 and it's game over because by the time the NX home launches, MS/Sony consoles will have so many 3rd party and 1st party exclusive games to choose that the most logical thing would be to pay $50 extra for one of those. Therefore, competing mainly on price, not on features, is unlikely to be a successful strategy for their home console. The casual gaming market already has smartphones/tablets so they wouldn't care to buy a $200 console that's barely better than their iPad and way worse than a PS4.