I think its because Nintendo has already many successful IPS so its hard to every generation find a new one that works that well. ARMS numbers are pretty good for the game itself, I don't think Nintendo was expecting more than that. Wii U gave us splatoon 2 and Mario maker, but for example, I doubt that games like pokken which is a similar genre as ARMS will make it to a second game.

You don't need instant mega success to build a successful new IP. Mario didn't start off being this massive pop culture icon he is now, he had to earn that status with multiple hit games. Million WW is a good start for ARMS as far as Nintendo is concerned as they never said the game failed to meet sales goals (same with 1-2 Switch and Labo). Splatoon was a rare case of a New IP being an instant phenomenon, even Nintendo was surprised it caught on that fast. Meanwhile, most franchises need multiple games to find their footing in the sales order. Besides, there are properties Nintendo has that do far worse than ARMS, yet they still keep them around anyway (Pikmin for example). 

I don't think a lot of people really consider them failures from a financial perspective. A lot of PS3 exclusives sold in the 1.5-3 million range, and had cutting edge high end budgets. I do think that there's a general sentiment that these games are failures from the perspective of launching a new IP that can becoming a long lasting franchise, because well ... the signs are already there that that is in fact the case. Arms has had so little fanservice despite the fact that it was one of Switch's major releases in 2017. It shipped 1 million in two weeks but it's last shipment number was just a little over 2 million despite having an entire year, a holiday season, and a month or two to spare.

As for 1+2 Switch .... that game will probably end up having decent legs because it's a party title that people might get when they pick up a Switch. But the general idea that 1+2 Switch is a failure in terms of starting a promising new series is A ) It doesn't cater to gamers, so there's a lot of forum echo chamber B ) It didn't do Wii Sports numbers, so in the eyes of many there was no reason for Nintendo to even bother and C ) Nintendo abandoned Wii-brand games and Nintendoland, at this point Nintendo abandoning gimmick games is just something that happens. It was meant to show what kind of ridiculous fun you could have day one, there's not a lot to get out of it beyond that point.

I don't really think the problem is that these games aren't doing Mario or Splatoon numbers ... that's just generalizing too much and is over the top. But there's definitely a reason why people are more positive about other niche franchises like Pikmin or Metroid than they are Arms or 1+2 Switch.

People just have the bar set in orbit along with some slight double standards imo they'll say Labo and Arms are failures for what ever reason at those sales yet you look at Metroid games which sell with in the same amount of units and some of the same people defend the series sales as adequate while trying to maintain that the series is still big despite the former games selling more or less the same well in Arms' case it's outsold the majority of Metroid games and even has sales comparable to major fighting games like SFV and Tekken.

People are more willing to dismiss a game as a failure if it's not to their taste or geared to them which coupled with a high bar leads to what you've noticed, the truth of the matter is these games aren't failures they just didn't sell with in the insanely high region some first party games do.

ARMS only needed to last as long as it needed to, Kosuke Yabuki confirmed that the plan was always to get to Version 5.0 within the first year. It wasn't meant to be a long term game in the same way Smash Bros. And Splatoon are. Besides, ARMS has a loyal following, and is still being supported by Nintendo through Party Crash events. Which are a cheap way to keep the game relevant with its players for a while, and gives the development team ample time to work on a sequel. Nintendo's made sequels to games far more niche than ARMS before, so don't be surprised if we see ARMS II in the near future. 

Yes, really. I listed their marketing efforts in my post and they definitely went all-out for this one. (I have a subscription for "N-Zone", a big german Nintendo Mag and they were invited to a huge event dedicated only to Labo and made it very clear Nintendo was pushing this hard - just another point to show Nintendo thought this would be a huge hit).  The long-term speak is PR talk of course: Labo didn't meet their expectations and so they say it's supposed to sell over the long-term... which it won't. The latest packs didn't sell well and the reason Nintendo didn't put a big marketing push behind those is because they knew Labo didn't sell according to expectations based on the initial Labo games released. 

Never said it needed to be a long term game. Nintendo has plenty of games that have great legs despite no long term plans. In fact they are kind of known for that. The game's hype simply died out incredibly fast. Of course it has a loyal community, as do 99% of games. It's just a very niche one. 

I actually wouldn't be surprised at an Arms 2. I think the sentiment that Arms is a failure mostly comes from the fact that many people just don't like the game. Or rather their interest died out fast. 

I really don't think this is the case. Here in North America at least, Nintendo never gave Labo a massive marketing push. It was revealed outside of a Nintendo Direct, and kept as far away from them and E3 as much as possible. Even when Labo did launch, it's marketing hype was minimal, and review copies were mostly sent to tech outlets and not gaming press. The most in terms of big marketing blitz we got was a few pre-launch hands-on events, and a music video by Ariana Grande on Jimmy Fallon, but that's about it. 

I don't really think the long-term sales speak is just PR. They seem serious about this being a long-term product. Reggie even said that it's met their sales expectations. And when they talked about sales increases during the holidays (which did happen BTW, at least in Japan) they never hyped it up to be the hottest new toy this year. In fact, leading up to the holidays, Nintendo still didn't give Labo the massive push. You might say its because the Vehicle Kit didn't do well, but keep in mind, the Vehicle Kit had a massively reduced shipment, so there wasn't a lot to sell to begin with (likely because Nintendo felt that the Vehicle Kit would be more niche than the Variety Kit). We don't have official word from Nintendo about it's Holiday performance yet, so who know what they actually expected. But I don't really buy that they expected this to be an instant mega hit in its first year, all evidence that I saw points to the contrary. 

If it's not a failure why do you feel that you have to defend it? If it's a good game, sold well, people who play it like it and Nintendo doesn't consider it a failure, where exactly is the problem here?

I believe one reason that bar is set in orbit is because certain fans put it there, prior to release.