It doesn't matter really if Silicon Knights still had stock held by Nintendo. The point is under Lincoln/Arakawa they were allowed to work on a game like Eternal Darkness (which was greenlight BEFORE Iwata).
Under Iwata, he basically let them work on Metal Gear (a Japanese IP, pretty much in line with how the Iwata era would go). When that didn't sell as well as they hoped, Nintendo basically never worked with them again.
Perhaps there is some mutality in the decision (I can't blame a Western dev for wanting to leave if they're never allowed to work on original ideas), but why not then replace Silicon Knights, Factor 5, Rare, etc. with comparable studios?
Iwata did none of that. He simply let relationships here lapse and brought in no new Western developers to really replace this lost output.
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