I think Sonic can work in 3D, but they have to change the mechanics. Sonic was fun because he was kind of the anti-Mario, in more ways than one, though more specifically gameplay wise. That was fine in the Gensis days. One of the problem with Sonic's 3D outings is that Sonic Team basically decided that Sonic was great because he was fast. Sonic the Hedgehog on 360 sucks because it's, ironically, too fast. Sega can't reduce Sonic gameplay to "you're fast, now run."
Super Mario 64 worked so well because it wasn't just Super Mario Bros. in the third dimension. Nintendo found a way for the game to feel like a part of the Mario universe while also making a highly original title. Mario levels were never objective based, but I almost feel like that made the game better. It exists as a Mario title yet it is like no Mario game before. I suppose that's my major issue with Sunshine, but that's a different topic.
Perhaps, as others have suggested, the problem is Sonic Team. You can blame it on a lot of things. I believe that they never excelled at making 3D games. Furthermore, they haven't made much of an effort to improve in that area. Most teams outside of Sonic have fared slightly worse or failed miserably while working on Sonic (i.e. Traveller's Tales, I'll let you decide how they've done). The answer could be as easy as "give Sonic to someone else." Focusing one making one great title instead of 5 bad ones wouldn't hurt either.
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SixthAngel wrote:
They shouldn't train a new Miyamoto, they will never measure up, but instead let the new blood use their own style and bring something new to the table.
Or they could just "steal" talent. Imagine Hironobu Sakaguchi, Yuji Naka, or Shinji Mikami working at Nintendo. That would basically solve both issues of buying a struggling team and grooming young directors/producers. Of crouse, I'm not serious, but if you're looking for an easy out, there's nothing easier than employing proven talent.