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Retro and Monolith aren't free. Retro's working on an unannounced project for the Wii U, Monolith is working of project X Zone for the 3DS. 5 of Nintendo EAD's 7 divisions released a game last year, and 2 will release a game this year.

The main problem is that they don't have the capacity to release as many games as the industry wants. Even nowadays they outsource a lot of stuff that they could develop inhouse.