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TL;DR - Reggie calls AM2R a "commercial product" and says that definition is what caused Nintendo to aggressively shut down the project, even though it allowed Milton to create it to completion and release it, albeit temporarily.
(Waypoint in bold)
So, one of the non-Switch titles that was here at E3 was Metroid: Samus Returns, a new remake of Metroid 2 coming to the 3DS. One of the responses I've seen to this is: Wow, this is exciting, but lots of people just played a fan-remake of Metroid 2 last year called AM2R.
So, look, I want to be an adult about this stuff. I've worked in the IP industry before, I understand why Nintendo has to be aggressive in defending its copyrights, I understand why it has to be aggressive in defending its trademarks. But, some people see an opportunity here to work with the fan community and to figure that out.
You're Nintendo, you're one of the biggest games companies in the world, you have been the face of video games for a long time. We live in an age where people are increasingly blurring the line between fandom and actual creation—finding ways to work directly with fans. So my question is theirs, which is, why wasn't there a chance there—or even, has there been a chance—to speak to that, to try to work with a fan creator like AM2R's Milton Guasti or other fan creators?
So, I think there needs to be clarity in what the line is, and, in our view, the line is when an initiative crosses from being an homage to something that is monetizing our IP. We allow homages to exist in a variety of different ways. And, for me personally, as a fan before I was an executive, I understand the attraction that you could have to our IP. But, when it transitions to something that... now, you're trying to monetize, you're trying to sell, you're trying to profit off of, that is what broaches or breaks through that line for us, where we have to claim our IP protection.
How are you talking about monetization here, because with AM2R, that was a game that anyone could download for free, and again I think, for fans, there was this notion of, "go talk to that person," or "go talk to other fan creators" and see if there's a way to not kill that project, to investigate the ideas that happening there that are exciting, who knows.
But again, to differentiate this, we have had conversations with entities that started as fans and became more of a business partner. Those conversations happen all the time, but again, when something transitions to a commercial product, and that's what [AM2R] was—there wasn't a charge, but it was now a commercial product.
I guess I need... what's the definition of "commercial product" for Nintendo?
Well, again, it's all about... How do we protect our intellectual property? How do our creators, like Mr. Sakamoto, who created Metroid, and Nintendo control that intellectual property so that we can drive where it's going, versus someone else driving where it's going.
That's where the line is very clear for us. And again, we could go on to YouTube and a variety of different places and see fans doing interesting things with our IP. But when it turns to driving the direction of the IP, or somehow monetizing or becoming a commercial project, that's where for us, the line has been crossed.
You think AM2R's a "commercial product" because people could monetize a playthrough of AM2R by going to YouTube or Twitch, etc. The strange thing is your company could have stopped AM2R dead in its tracks for years prior, but you turned the other cheek (which we're grateful for). For all intents and purposes, the creation was completed and it's been distributed - and continues to do so through dark web.
All Nintendo's shutdown did was piss people off. People aren't going to stop buying official Metroid products just because a fangame exists. Get real, Reggie. Furthermore, why didn't you just admit it's because MSR had been in development? What could you have possibly gained or lost by using this extremely effective reasoning to why you shut down the project? People would have EASILY accepted this answer instead of dubbing AM2R as a "commercial product."