The problem with calling anything niche is that it is extremely subjective. Let's review the FP1 characters:
- Joker, the main character of one of the most beloved JRPGs in the past decade. If you're familiar at all with the JRPG scene, you almost certainly know of Persona, and there's a strong chance you're familiar with Joker himself. Even if you were to argue JRPGs themselves are niche, they already enjoy quite a bit of representation in Smash between Cloud, Shulk, Ness, Lucas, seven Fire Emblem characters (not counting Byleth), and even arguably the Pokemon characters, which is a pretty substantial chunk of the roster. Joker may have been a surprising selection, but given his popularity in recent years, I don't think it is undeserved.
- Hero is four different protagonists from one of the most famous game series in Japan. Series character designer Akira Toriyama is one of the most famous Japanese artists ever thanks to Dragon Ball, the Slime is one of the most famous video game characters in Japan, and by using four characters it captures a variety of Dragon Quest games across the generations. Even without touching the JRPG angle, which I just discussed with Joker, I think it is safe to say Dragon Quest is very much not niche.
- Banjo and Kazooie are fan-favorite characters from the N64 era of the late 90's. Speaking as a 90's kid, everyone knew about Banjo-Kazooie and Banjo-Tooie, and comparisons between the two games and Super Mario 64 were commonplace. The series may not have ultimately gone on to truly rival Mario, but those games became classics for a reason. I think it says a lot that this was perhaps the most popular addition of FP1 despite having been a dormant series for many years now.
- Terry is perhaps the least-known character to the average Nintendo fan, but as someone who follows the fighting game community, I can't downplay just how exciting this selection was. King of Fighters is one of the most beloved series of the genre, and regardless of whether you are a fan of Street Fighter, Tekken, Mortal Kombat, anime fighters, or whatever else, you're almost certainly familiar with KoF and, for older SNK fans, Fatal Fury as well. Terry's exclamation "Are you okay? BUSTER WOLF" is a particularly famous line, well know among the genre in a similar fashion to Hadouken/Shoryuken. While it's still a little surprising we got him instead of a Tekken character for instance, as an SNK rep, it makes sense why Terry is our latest fighting game character in Smash.
- Byleth...well, I know plenty of people aren't exactly thrilled by their inclusion, but we can't pretend that Fire Emblem hasn't been a success for Nintendo since Awakening, and their characters remain plenty popular within Smash itself. As the eighth Fire Emblem character, the argument against them wasn't whether they made sense for Smash, but simply if there were too many Fire Emblem characters as-is, and apparently Nintendo/Sakurai decided that including Byleth was the correct choice.
We could also throw in the upcoming ARMS character for good measure, but I don't think any of us can really argue that a character from a recent Nintendo fighting game is "too niche" or otherwise doesn't make sense for Smash. This also isn't to say that none of these characters are surprising: Joker and Terry were certainly unexpected, and as popular as he was, I think many of us expected B&K to be a lost cause. I'd just argue that we shouldn't say any of these character are "niche" or "random" or whatever else, because even if they don't appeal to you specifically, I can guarantee each one appeals to a substantial audience, and Nintendo was almost certainly thinking about those various audiences when selecting these characters.