It's interesting to me to see people discussing Capcom as being in a precarious situation regarding console development, when you don't have to go back too far back in time to find people discussing Capcom as the only Japanese company "doing it right" in console development, with their unified engine across games, specific pandering to western tastes and farming out of IPs to western devs to keep them relevant.
Was it RE6 where the perception changed?
I would time it to starting around the time Inafune left, not just because he left, but because of the domino effect it caused in tandem with some major changes in the video game market.
When Inafune was running Capcom's development arm, he was the singular head of decision making, and was pushing for things like heavy Western expansion, trying to make Monster Hunter bigger than Dragon Quest, and using outside resources both within and outside of Japan to keep their output up among growing development requirements. His ideas certainly didn't always work out, but they did have a pretty good success rate and helped keep them relevant in the market.
However, by Fall 2009, both Modern Warfare 2 and Assassin's Creed 2 came out and showed publishers that GTA like sales weren't just some Titanic-esque cultural phenomenon, but rather something they could all aspire to. Western publishers started refocusing in droves with the goal of no longer making 1-3 million selling titles and instead aiming overwhelmingly for 5-10+ million selling titles, pouring in huge amounts of resources into their games.
Capcom meanwhile was signing up increasingly questionable development partners and, especially with Inafune's departure, started promoting a bunch of their game producers and directors into management positions they were not qualified for nor likely even wanted judging by statements from Mikami (about the Capcom of yore) and Ono about the management situation. Given the exploding costs of their games, they also tried to cut even more costs wherever they could with things like development timelines and going back to their old strategy of re-releasing the same game with upgrades and charging a whole bunch of money for it. Both their internally and externally made games suffered significantly. Given that their competitors were offering the moon, this made Capcom's products look horrible in comparison, and their sales followed.
After this, realizing they couldn't really compete anymore, they first tried shifting to 3DS as their primary platform going forward. However, it became apparent pretty quickly that while some of their games worked really well on the platform, others didn't, and they abandoned this strategy. Then they went to flooding the mobile and browser market with outsourced games, and since they were all awful, they tanked and got shut down shortly after. Finally, they ended up where they are today, at which point they've shut off nearly all external development (because they found it too expensive), set on a path to hire 1000 college graduates (to staff up cheaply), and are focusing on internally made mobile and service titles where the cost of development and expectations are notably lower, while still making a few traditional dedicated device titles in the few brands that are still viable relative to their skill set and capabilities. However, almost no one at Capcom actually knows how to make these types of games, and they're overwhelmingly hiring college graduates who would have no experience doing this either, so it's hard for them to hone in on exactly what they should be doing.
The wombo combo of Dragon's Dogma bombing (their big push at the time was "internally developed new IP, externally developed existing IP" since Dead Rising 2 was successful while their new Western IPs were not, yet here their shining hope just failed) and Resident Evil 6 getting eviscerated in reviews (and selling a bit less than they were hoping) was certainly a big part of cementing their decision to no longer be a major AAA publisher. I do think it also signaled pretty clearly to everyone outside the company that they weren't going to be able to keep up with the AAA standards of the West.
That's one of reasons that MH4U's reception is somewhat opposite between Japanese and Western market. Some people were disappointed with paying $60 and didn't get enough of it.
In Capcom's defense though, they have been doing this a lot with their fighting games (Street Fighter, Darkstalkers, even Gundam series) and customers were okay with it back then. Also additional contents on MH4U compared to MH4 is somewhat comparable between MHP2 and MHFU. However time has changed that people are now aware that gaming device has storage so they demand Capcom to charge for additional contents only.
Right, like many things, Capcom was notably impacted by an inability to adapt to the changing market. That said, at least Monster Hunter still sells quite well overall, and doesn't cost an absolute fortune to make.
I pretty much agree with that you have written.
People say SE's strategy differ between Wada and Matsuda but bolded part must be large part of their current increase of announcement on console front. Heck even Saga2015 was once proposed by Kawazu as the PS4 game but ended up as Vita project (SE higher ups saw less Western appeal maybe?) Do any unreal engines run on OG 3DS? I'm starting go wonder developing cost of AAA 3DS game won't be that much different from UE4 HD game.
If you want a licensed engine on 3DS you're pretty much SOL. The thing that helps mitigate the problems related to this is that games are pretty low end on the system development resources wise, so the idea of building one, even if it's harder to do things, is a lot easier to swallow.
However, once you get attached to your really nice toolchain using Unity or Unreal, it can be hard to go back. You also don't get the benefit of your game being pretty easy to port around to fit different markets/demographics because the engine provider has done most of the work for you.
YW3 will be released for 3DS at 2016 though. Will they bother to port that to NX too?
So I'll address this in both the specific and the general.
For Yokai Watch 3 in particular, I could see the expanded edition releasing on NX since it makes sense for any older fans of the series and for a potential Western release where the 3DS is fading pretty fast.
However, it is important to keep in mind that this is primarily a children's series, and most children don't get the newest system the month it comes out. As such, they will likely be cross-gen on the 3DS for a while. If the game is not going to be cross-gen, then it will almost certainly be only on 3DS as well.
To answer more generally, I don't expect many NX exclusives at launch, but I do think there will be quite a variety of ports/remasters available. Now, I'm hesitant to go too far on this because we don't know what the system actually is, as Pennywise correctly points out. If it's just a home console, then support might be dire. If it's the next handheld (or both), then I would expect developers to more readily show up, especially if it has enough power and a broad enough featureset to accept popular engines and Nintendo has worked with the engine providers to ensure they're actually there. In the same way many publishers are choosing to port their Japanese PlayStation only line-up to PC and/or Xbox One for the Western release, it's not hard for me to imagine them looking at the same games and shoving to on the NX to boot. I feel the biggest blockade to doing that currently is that the 3DS is just such a tremendous technological odd-duck that it's not nearly as appealing of an option if you're not just making a game for it exclusively, whereas it's much smoother to port between all the other platforms.
It's possible that demographics are seen as the #1 reason to not do this, and it's such a strong and overpowering reason that we would still see a strong split between Japanese games on Sony platforms and Nintendo platforms, but given how pliable Japanese developers have been on platform choice recently, this doesn't strike me as the most probable situation.
To cover late gen 3DS games some more in particular, I think pretty much every Japanese developer saw how the cross-gen launch of the PS4/XB1 went over in the West (exceedingly well, both hardware and software wise), and is likely to jump on with anything they want to sell abroad. I'm noticing that a lot of companies seem to be porting what would historically be PS3 and/or Vita only games to the PS4 with a Western release in mind, sometimes going so far as to release the game only on PS3/Vita locally first, and then getting the PS4 port done in time for the Western release. Tales and Digimon are two good examples of this, and given that Star Ocean 5 is leading on PS3, I don't think that PS4 version was originally envisioned for the domestic release. This is before we even get to PC ports where it really obviously has nothing to do with the domestic audience. This is, of course, all stipulated on them having some level of faith that the NX will do well abroad. It's also possible these things don't only ship on 3DS/NX toward that end, but for the domestic market, I feel what matters most is that they're present, not that they're exclusive. Nintendo can certainly bring the first party line-up themselves.