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I think it's a good decision.

The developers have been working on LBP for a while now. It seems with LBP2 they added a ton of stuff...I think now the developers are simultaneously running out of ideas and burning out on working on LBP2. They've reached a point where most of their effort will amount to small changes instead of huge ones.

It's more satisfying creatively to do something big and new then add several small features here and there.