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curl-6 said:

Nintendo has increasingly turned to outsourcing in recent years because EPD can't make HD games fast enough to provide a steady stream of content. Starfox Zero was outsourced to Platinum, Metroid to MercuryStream and reportedly Namco, etc.

It comes back to it simply making no business sense to commit a flagship team to make a game that will be lucky to reach 3 million lifetime when that same team could make the next breakout new hit or 10 million plus seller. ARMS was not a breakout success, it didn't push hardware and it fizzled out and was forgotten inside a year.

Sorry to crash into your discussion, but I just wanted to add that it wasn't Nintendo who approached MercurySteam, it was the other way around:

https://nintendoeverything.com/sakamoto-on-metroid-samus-returns-development-final-boss-switch-more

Also in your later post you mention Kirby being deleoped by HAL and Mario Tennis by Camelot. This is not outsourcing, though. All Kirby games are made by HAL and only Camelot makes Mario Tennis games, so it's rather natural that these games come from these studios.