At the end of the day they need to offer more than isn't contingent on already owning something else, because for someone who hypothetically doesn't own many or any of the game DLC being offered, it's still not a good deal. It's also just renting something which should be permanently owned. They can start with a much more comprehensive back catalogue, but even with adding Gamecube and GBA, that price is still a big ask.
For $50, given what they've priced at $20, and given what the competitors offer, I think you'd not only have to offer those other two systems as well, but take a page from the other two and offer a rotation of free games monthly. Now those can be rented, because they're full free games, but they really need to sweeten the deal from the ridiculous offer of old games and DLC rental for more than double base price that it is now.
Feel that they counted on so many people owning New Horizons and being interested in the DLC as a bonus. That or the DLC tacked on top of the expansion pack tempting more people to buy New Horizons... and:
I mean, to be (slighty) fair New Horizon stands at 33 million copies - 2nd only behind MK8DX. But not only does it look like a major mis-step from what you said, but also because the NH DLC can be bought separately ($24.99, five dollars cheaper) while the N64 / Genesis games can't. Yes, one can see this as Nintendo covering both bases if one is charitable... But there are two confounding factors here:
A) For people that look at the DLC primarily, is N64 / Genesis games really worth the extra $5 (and $30 in subsuquent years)? Most of them might just take the $25 option.
B) I really dunno if the expansion pack will entice people to buy AC. Those 33 million are more than a 1/3 of Switch's install base already, and Nintendo's effectively asking the other 2/3rds for $60 in order to get full value out of the expansion. The $85 for NH and its DLC may look preferable for many to the implied $90+ for the expansion pass.
So yeah, I have to wonder if this was entirely thought through. Full games would've gone over a lot better by comparision due to not needing to pay out another $60 (and to confound this Nintendo does not believe in sales - as in the temporary price reductions - either).
Again, I'll reiterate that I wouldn't be surprised if the expansion pass does decently if only because $50 a year is in the same ballpark as Microsoft's and Sony's established offerings and there's probably a segment of people who would view this favorably... but I can't imagine it doing amazing either because the extra $30 comes with so many proverbial holes that a Swiss Cheese would look positively solid in comparision.