I mean, I think that's what you saw at the launch of Wii U, but eventually it just isn't cost effective anymore. Nintendo might pay up for *exclusives*, but once you're paying just to have parity with everybody else that's just a bad place to be.
They just have these huge gaps in their release schedule. They can either ramp up internal production schedules so that they can release more 1st party games per year, or they can throw some marketing/production money to developers to get those gaps filled. To me it seems that the moneyhats are the better option for a 1st party with a limited number of studios.
If they simply waive royalty payments it's not like they are spending money to get games. A cancelled Watch_Dogs earns $0 for Nintendo. A royalty free Watch_Dogs on WiiU earns $0 for Nintendo, but at least the people that bought their system are satisfied and engaged rather than playing nothing and thinking about trading the console into Gamestop.
Of course I have little to no knowledge about the economics of game production. It's entirely possible that even a royalty-free release of a AAA game might not cover development costs for the publisher.