I don't think it's really Nintendo's fault, 100% that sales are down. We've reached a time in gaming where it is really hard to introduce anything new and remain cost effective. We're hitting a ceiling in the technology available and it's making gamers feel like they are being offered the same things over and over again. Nintendo has always been the inventor in the world of gaming companies, and they continue to show that with their 3-D capabilities on handheld devices, the use of multiple pieces of hardware in order to further engage the player and more. The other companies generally copy Nintendo in their own way for their accessories.
I think the other companies know, deep down, that they need Nintendo to be the idea guy, but have reached a point where superficially they may be thinking that they can come up with innovative ideas all by themselves. So far, though, the only real change that Microsoft made was bulldozed down by an angry fan base and Sony hasn't offered anything new but a better graphics chip and a promise to have better backwards compatibility than the disappointing quality of the PS3.
For now, I would say that the winner will be the company that bags the most popular games. Nintendo has had a strong core for the same series for decades, so I don't think they will be the first to drop out of the gaming race. They have more series to continue than any other gaming company and the strong teams to keep pumping them out. I have found every Nintendo upgrade of mine to be very satisfying. My only regret is that I always wait until the fever dies down so I can get a discount, because by then the really good games have made their way out of stores and I have to spend time browsing online listings in order to find games I want to play. However, there are always lots of games on each Nintendo upgrade that I want to play. Backwards comp is very important to me, and Nintendo delivers the best on that front.