It makes sense. It may suprise a lot of people on here but their biggest market is not the people who demand 4k 60FPS in all games and will riot if they don't get it. Their main market is kids playing FIFA and Minecraft and other casual gamers who just enjoy fun games at a reasonable budget.
For that they really got it right with the Series S.
While I agree with you, the fact that no game has released in the past 10 years without major patches and updates means what's on that physical media is useless
Nintendo understanding this market is a big part of how they've been outselling MS and Sony in the Wii and Switch generations despite being behind on hardware power.