They find success, then they try another spin of the wheel spreading out to another IP they don't own, convincing themselves that just because that IP has as much or even greater reach that the same thing will be replicated again and that the road to success is just capturing more and more markets by working with more IPs.
By the time their second partnership product is out, which probably was a lot more expensive to develop than the first, they probably already have a 3rd in the pipeline. Often this second product is received much worse than the first and the hope that "Harry Potter's market is X big compared to Pokemon so we're due to have a revenue of X from it" is completely crushed and the product is a fraction of the success of the last, this is where things start to go pear shaped, many companies at this point make the mistake of doubling down on even more IP partnership products to try and build up the revenue but the returns are all diminishing and at the end of the day you don't truly own your products and are stuck paying out large percentages to IP holders.
I worked in a startup in a field where every single one of our competitors and the company I worked at fell into this trap and maybe 1/4th made it out the other side.
I see they may have now figured out its a bad idea but only after what seems like 7 spins of the wheel (Pokemon, Harry Potter, Minecraft, Catan, Transformers, Pikmin, NBA) with diminishing returns. Because now they're developing their own IP which looks to be a Pokemon clone. This wont work out either really because their main customer base are not with them because they're Niantic, they're with them because of Pokemon so bootleg pokemon wont cut it.
Now as a thought exercise lets imagine if all those years ago they hadn't thought "Let's bring the Pokemon IP to the real world and smartphones and piggyback to success off it" and instead thought "Nintendo hasn't seen the potential of a Pokemon smartphone GPS game and have no presence on these platforms. Let's build the game that will be Pokemon for the next generation with this first mover advantage" and had Peridot as their second game, not their 10th".
Might not have done the numbers Pokemon Go did, but they'd own it completely, own the merchandising rights to it completely and over time you'd have a generation who grew up thinking "Pokemon? oh that's like Peridot isn't it"