The funny thing is a lot of you guys are criticising him even though you didn't really get what he was trying to say.
He is not talking about user generated content but what he calls "ANTI-content". Whenever the game doesn't entertain you by itself but relies on you to create fun he talks about "anti-content."
Wii Music had a lot of "anti-content" because people wanted to play instruments in a realistic manner. According to Malstrom (I haven't played the game myself) the game rather focused on creating your own songs / videos / whatever, though. That means you had to create the content by yourself which the consumer usually doesn't like.
Little Big Planet is probably NOT such an example: The game's only purpose is to give you tools to create levels. The game is fun because you can create the levels not because you can play them (of course playing a level can also be fun but that's not the game's focus) and thus it offers a lot of content. If the focus was "PLAY great levels!" instead of "CREATE great levels" this would be an example of anti-content.
I disagree with him on Flip Book Studio, though. The entire context of the game is to let you create things, not to watch them and thus it offers a lot of content.
In case you're still confused remember: Value depends on the amount of content related to the "purpose" or "job" of a game! If your game's job is to let you create levels than a big level editor is great, if your game's job is to lt you PLAY levels then a big level editor with nothing else just sucks.
Edit: Take "Do-it-yourself" cocktails for instance. You buy a do-it-yourself cocktail set to MIX cocktails. The value of the set comes from offering you the opportunity to mix those cocktails. If you want to DRINK a cocktail at a bar you'd be pretty angry if the barkeeper gave you some fruit juices and ice and told you "do it yourself!" but in the first context that's exactly what you want.
That means user generated content can work but only if the user sees value in actually creating the content instead of consuming it. Most people buy games to consume content and if they realise the game is only fun when they create content they feel cheated and the game loses its value. If creating content is what you are looking for you will probably feel cheated if the creation-part is bad (the whole purpose of a "create your own cocktails"-set would be gone if there were just 3 complete cocktails inside).
So what Malstrom criticises is that in his eyes Nintendo tells people "creating is fun!" and then says "well, people didn't understand it" while in reality people did understand but just didn't want to create. They rather wanted to consume. Now his fear is that Nintendo could become "arrogant", could release more "anti-content" games and continue to tell people they are just too dumb to understand (which was always a big complaint for him regarding Sony and Microsoft) and consequently lose customers. Of course that's debatable but I'm sure a lot of people didn't even read what he wrote.
