I don't agree. Those franchises forced them to be so iterative, that even games I really enjoyed have been run dead into the dirt. The scale of those games also do not match their previous generations output at all. Ni no Kuni does though, but I'm not sure if we'll see another one of those anytime soon.

This is surpriseing to me.... Level 5 does good work (atleast Yokai Watch & Ni No Kuni).
Hopefully they bounce back from this.

*edit: holy fudge.... they did Dark Cloud, Rogue Galaxy, Jeanne d'Arc... back in the day when they still worked with sony!

Go make some playstation games Level-5!

Screw MS.... they should go to Sony.

These are the guys behinde Dark Cloud! and Rogue Galaxy, Jeanne d'Arc ect, back in the psp/ps2 days.
Time for new installments in these series.

Ya, but they also did White Knight Chronicles twice with Sony. 

Honestly Nintendo is the only one that would fit with the current level 5, but I want them to remain third party. 

Sometimes companies just change staff slowly, and eventually stop being the same company. They start making different games from what they made before, because different people work there now. Look at how much Sega's Sonic Team changed over the years. Look at the wild differences between 90's Final Fantasy and post 2000 Final Fantasy. Could Retro Studios even make another Metroid Prime game? I doubt it. At least not a good one.

The good thing about this though is that if this is true, the creators of amazing games like DQ8, Rogue Galaxy, and Dark Cloud will just move their talents to other companies. It happens a lot in comic books. One writer leaves Marvel or DC to join the opposite side. Or they start writing for Image or an indie book. Suddenly those creators have freedom again that they lost in their years working for their old bosses. And their writing/art becomes so much better for it.

Ni no Kuni 2 is the only great game they made since NNK1 imo (the art style for the overworld and how easy the game initially was is the only issues it had. Now that I'm playing it over on expert it feels like it's how the game should have been)

I'm pretty sure they're fine financially, I think they let the Japanese success of Yokai watch blind them and they realized they were going overboard and cut back. I think Sony needs to ask them to do Dark Cloud 3 and get them focused again. Dark Cloud 2 is my all time favourite game and despite peoples negativity against the white knight titles I thought once revisted and they made the second game it was fantastic

Screw both of them, I'd rather they remain third party instead of locked to third and one system only.