I'm not sure how you're framing that as a subsidy. It's a killer app that gets people over the threshold to purchase the platform (console). And then once the install base is established, everyone else wants to make their own games and has to pay you (a lot) for the privilege.

Developing first-party games costs more money, to both Nintendo and consumers, so it's the opposite of a subsidy. But they're compelling enough, they clear the purchase threshold and establish the platform on which the rest of the business is built.

Parent commenter meant subsidizing the actual hardware costs. The same is true of pretty much every other console, they can also sell the hardware cheaper for this reason

Nintendo is a funny example here though, since they are notably the one major player which actually makes a profit on their hardware sales directly. They do also make a cut on the other games still, though.