Exactly how I predicted in when I was visiting FFInsider forums.
I knew from the get-go that Nintendo was going to have to pull some bears out of their hat to stay in the game, eventually. Nintendo never did have enough of what both the Xbox and ps2 have - third party support. Why? Who knows... at least, I don't. The Gamecube has been dwindling ever since the rage caused by The Wind Waker calmed down.
However, one could have easily anticipated this event way before that - the fact it doesn't have a DVD player or any other special feature definitely turned away college students and software pirates alike. Regardless of how illegal piracy is, it still helps sell the consoles. And when the Xbox was leading the Gamecube in sales in the US, you could easily see that Xbox would going to be second worldwide, as it is now.
All a matter of perception.
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