Honestly, I wouldn't be surprised if it has to do with how easy it was for folks to set it up with all of the NES roms and then some.
Producing enough of these could cut into their ability to sell VC games on Switch.
Sounds like something Nintendo would do lol. "This 60 dollar thing is taking away from me selling 5 dollar things digitally that not many people buy anyway. Let's discontinue the 60 dollar thing"
Sadly i think that is the exact logic they used. Nintendo is way too prideful and couldn't come to grips with the fact that all their amazing classics were being ported for free. Little do they realize emulators have been doing this forever. And people also hack Switch and Wii to play NES. It's almost unavoidable. Not everyone was doing it and it costs them almost no money. People who buy VC games don't emulate or hack because if they did they wouldn't waste money on VC games. But they killed their core audience just to punish random hackers that don't buy nintendo items anyway.
Plus it's only VC nes games, their VC capabilities for Wii games, Cube games, SNES games and DS and GB games were still in tact. Plus not everyone wanted one so they would still sell VC games to switch owners who didnt care for the Mini.