They made it a full on console, that is a full generation behind in specs mind you, that you can pick up and game on the go with it, versus making it the next gen handheld that you can dock to your TV. $199 was the sweet spot they should have been aiming for, with full compatibility (through virtual emulation) with the already huge (3)DS library. This company has been run by morons for years, they absolutely refused to adapt in the console space in the mid 90's and they have been doing a terrible job of trying to catch up ever since. The only bump they had was when they released the Wii. Why? Because they caught lighting in a bottle, and captured a market that would never have otherwise touched gaming just before the onslaught of mobile gaming.
Yet they were wildly successful in their handheld markets, and on first glance, they seem to be kind of ignoring that ecosystem. I know it's all just one thing now, and over time there will be no line between the two, but right now they appear to be pushing a living room console experience first with a price that is more expensive than more powerful alternatives. (once you consider the price of a game to go along with the 299 for the system). It just sucks that a staple of my childhood began it's final death throws last night, and it's all because of bungled management dating back for over 20 years. Ugh.