I believe Nintendo intends to profit via software licensing and hardware sales. The Wii was profitable at launch[1].
But I wonder how the Virtual Console works on the Wii. Does Nintendo have an SNES hardware-to-software conversion guide? Do their VC releases turn out perfect? I've bought a few, and while they're certainly faithful, I'm not enough of a connoisseur to spot the flaws.
[1] http://www.next-gen.biz/news/fils-aime-wii-hardware-profitab...