Both Zelda and Xenoblade 2 DLC is 50 bucks in total. The DLC for Smash Wii U and 3DS, in total, cost about $73 (
someone else did the calculation). If you bought just the characters and stages, its $53 dollars. So to say that "It made more money because its more expense" is incorrect. Moreoever, the numbers I'm comparing also include Mario Kart 8 DLC. If anything, it might have under performed. Note that the Wii U version is over 5 million and the 3DS is under 10 million (keep in mind, this doesn't consider double purchases). Zelda now is over 10 million and Xenoblade was at about 1 million at the end of FY 2017. So your comparison is wrong.
Ignoring New Super Mario Bros U and 3D World (it was a type BTW), look at Mario Kart 8 which sold far more than Smash. Most sales for games are made within the first few months (if not weeks or days). Nintendo games usually sell longer, but those games releasing sooner won't much a difference in the long run and the sales for both will eventually hit a sort of 0 point. Maybe you can say NSMBU was higher because it was a launch title, but if you look at sales, people were buying the system to get NSMBU, not the other way around.\
As for Smash increasing sales of other games, there doesn't seem to be much evidence of it happening. Supposedly it helped Bayonetta 2, but the sales of that game were still low even after that. It doesn't seem to create a large affect. If that the logic though, wouldn't Nintendo be better served promoting their own characters? They only get a licensing fee for the third party games. They get most of the revenue for their own games. If we are going by that logic, seems like Nintendo would be better served to do what I say and push their own characters to increase sales of their own games. Of course, this is assuming that even happens which I'm doubtful of.
A big difference between Zelda/Xenoblade and Smash is how the DLC is handled. With Zelda, you can't buy the DLC packs individually - you have to buy the season pass, so that's a $20 purchase. With the Xenoblade expansion pass, it's $30, and outside of the Torna expansion (which, oddly enough, is more expensive than the expansion pass), the items also cannot be purchased individually. The season passes are literally the only way to get the new content, whereas Smash Bros. characters, stages, and costumes can be bought individually.
By comparison, for Smash, the characters are about $5 or $6 each, and people have the option to buy them in smaller pieces. So if someone has no attachment to Cloud, Roy, or Lucas, for example, or they don't see the need to have all of the stages, then they can choose not to buy them. With Zelda (and, effectively, with Xenoblade), the season passes are literally the only options to get the DLC; the comparison seems flawed when someone has to spend $20 or $30 for the DLC in those two games, but hypothetically, they might only spend $6 or $10 on Smash and be perfectly happy with it since they haven't heard of Fire Emblem, Mother 3, or Bayonetta, or they haven't played Final Fantasy VII, or they got Mewtwo as a free bonus through Club Nintendo.
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I can't really comment on Mario Kart (its sales are not something that I've looked heavily into, though in theory, it's a game that's much easier to get into than Smash), but as far as the game improving sales of other games, Nintendo cannot survive with little to no third party support - the Wii U failed miserably due to poor marketing, but third party companies abandoning it in droves certainly didn't help.
Having third party characters in Smash helps to get both third party characters more exposure (fans who got into Nintendo through the Wii or Switch may not be familiar with franchises like Street Fighter, Castlevania, or Mega Man) as well as helping to get Nintendo series more exposure. (there might not be much overlap between fans of Nintendo and fans of Metal Gear or Final Fantasy 7 - people who look into Smash Bros. due to the inclusion of Snake or Cloud might start looking into the Legend of Zelda or Metroid since those characters look interesting, and that's all it takes)
Nintendo might get more revenue from using their characters over third party ones, but when it comes to sticking purely with Nintendo characters, there's going to be a point where the reveals aren't overly exciting. It's going to be hard to top something like Ridley or K. Rool; both characters had over a decade of passionate support behind them.
Having a mix of both Nintendo characters and third party characters allows Smash to represent a much broader view of video game history (even in the NES days, it's not like Nintendo was completely independent - games like Mega Man or Castlevania helped to make people Nintendo fans), strengthen relationships with third party companies, and make character reveals more exciting. (if they stuck heavily/exclusively to one or the other, they'd be scraping the bottom of the barrel by now)