Nintendo makes a ton of money on first-party games, and they could easily continue releasing their games exclusively on their consoles. They'd lose very little.
Random sideloaded games are just irrelevant when people are buying the systems for Zelda and Pokemon.
It's the fact that Nintendo, Sony etc wouldn't be able to enforce any licensing revenue since users could just install any game directly.
For Nintendo it would decimate the company since it's their primary revenue stream.