Rapidly cycling burnout would probably be "fine" if Level-5 could consistently come up with new properties to replace those they burn out.
They've managed to strike gold again with Yokai Watch, but given their fair share of misses along with their hits, I don't think it's particularly certain that if they burn the crap out of this too that whatever follows will be a Yokai Watch or Inazuma or Layton and not a comparatively less successful Little Battlers or worse a Time Travellers.
of course the next project could fail, as some in the past did, like cinderella rpg.
but I can't see the issue there. having a project failing could be a problem for any company.
the main question is: are they milking this YW and investing everything on a failing new project?
nobody knows, but if we are looking at previous commercial strategies and behaviours, answer is no.
why time travelers wasn't a serious issue for them? or cinderella?
because they had a huge hit with layton, where they were able to hae three successfull titles admortizing assets and engine. they invested the revenues in a crossmedia project that gave them even more success.
they investd the turnover gained in another crossmedia project, less successfull than the previous and mismanaged in terms of platforms transition, but way more profitable in terms of merchandise, thanks to the roy gained by the Bandai toys (thare are being distributed now in the west)
part of the revenues were also spent in Ninokuni, ambitious but still just a game, that sold over one million ww
then they decided to spread the investments on various experiment in additional new IPs in different genres, with cinderella, travelers and the evident "research" done with guild series.
with the good success of the normal project fantasy life. that is being distributed right now in the west, with decent results.
and without forgetting that across the new launches there still were decent or even better sales from the old IPs like layton or inazuma, plus the western sales, for which they got smaller but still existing revenues
in the meantime, they were preparing YW and we all know about its success
I think that their history so far demonstrates that they are keen in investing in many new IPs, looking for new success, and that once found a success, they shorten its lifecycle, especially for the cartoon based IPs, exploiting it while funding other new projects with the revenue gained by them
if they will get stagnant on YW while still milking it, I think that there will be a problem. If they will invest in many new projects, I think that some can fail but one could become another hit, judging from their past history.