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RolStoppable said:

No, it doesn't hurt the potential of the brand. Nintendo allowed Rareware to make Donkey Kong games, they handed Metroid to the unknown Retro Studios and Luigi's Mansion to Next Level Games. There are some great examples of outsourcing creating win-win scenarios, especially because Nintendo's portfolio of valuable IPs is too big to be covered by internal developers alone. ARMS isn't a game idea that is so out of this world that it requires an internal team for a sequel.

In those examples, it was because internal teams within Nintendo didn't have any ideas for those franchises at the time, so they looked for people who did. Yabuki on the other hand, has several ideas for a new ARMS, so if he wants to make a sequel in-house, he has the okay to do it more than likely.

F-Zero was created at a time when 2m were as big for a game as 10m are today. The context of time needs to be taken into account, so 2m today and 2m in the early 1990s are not equal. Regardless, Nintendo's internal developers only made one sequel to F-Zero before the IP got outsourced. The original Star Fox was co-developed with Argonaut, only Star Fox 64 was made internally; later Star Fox games were all outsourced.

2m is still a hit regardless of decade. Of course, the bigger the budget the more you'll need to sell to break even, but Nintendo games don't really have that high of budgets to begin with generally, at least not compared to most western AAA games. Even Miyamoto said BotW would only need to sell 2 million to break even. And again, F-Zero only got outsourced because the team within Nintendo had no more ideas left after X, so they turned to Sega for any ideas. Star Fox has always been led internally by EAD. Argonaut was brought in to help the developers make 3D models. Even when it started getting outsourced in the GameCube era, Nintendo quickly took the series back in-house starting with Command.

Pikmin is a very different story and basically the prime example of Nintendo doing things wrong. Their internal teams made three games in the series, each of which fell short of the 2m mark. Business interest got neglected to pursue the lovechild of Shigeru Miyamoto. Pikmin 3 went into development at a time when Nintendo's consoles were doing great in sales. Its development got shifted to the Wii U and when that console fell flat on its face and needed big titles from Nintendo's internal developers, they had Pikmin 3 in the pipeline. That's why it shouldn't matter what the console sales are, because it's always better to be safe than sorry when it comes to having system sellers in the works. Pikmin 3 with the pathetic sales history of the Pikmin IP was a guaranteed miss from the get-go.

Again, the Wii U wasn't doing well, so you might have had more of a point back then. But not for the Switch. If a new Pikmin from EPD releases on the Switch, it'd probably be the best selling entry in the series with 2-3 million copies. That's my point, if software sales and hardware userbase are this good for the Switch, why wouldn't you want to take risks on niche ideas? Just look at the last time Nintendo was doing so well in both categories with the Nintendo DS. It had software sales so ridiculously good, that even most of the niche games could do at least half a million, thus Nintendo was more inclined to take creative risks on that system.

Your entire argumentation would have merit if outsourcing spelled doom for an IP, but that's simply not the case. Given how highly regarded Nintendo's IPs are, Nintendo can basically pick who they want to work with on Nintendo IPs because that's a dream of lots of developers. And because of that, those developers are usually passionate about working on Nintendo IPs and that leads to better results than a run of the mill game.

It's arguably safer to keep a still new and fledgling IP in-house to nurture it more until it becomes one of Nintendo's star players. There's a difference between farming out Mario, and farming out ARMS. One's a long-running, established hit with years of influence for developers to pull from, the other is some weird, new thingamajig with only one game under its belt.