It’s funny because you don’t even have to go that far to find examples of really poor space usage.
Final Fantasy VII has the entire game on each disc. Only the cutscenes are different between each disc, that’s why the natural breakpoint for the game after the party splits up was shifted, because the ending video was too big and required a disc by itself.
The second a developer doesn’t have to worry about something, they don’t. Give them 2TB NVMe, 5090, i9-14900k and 32GB of RAM, and suddenly that will all be at max utilization. But this isn’t a modern thing, it’s just one of many “necessity is the mother of invention” examples.
Another great example: Every modern desktop app and most mobile apps that just package & run an entire web browser for every single app. There is zero benefit to the user experience or resource utilization to use these sorts of tools, the only reason to do so is to allow code reuse & simplify development.
I think it’s because the market changed around them. When the 3DS launched they were one of the only companies providing decent BC. Now, everyone does it and people expect games to actually play better on the new devices.
Still a surprise that Nintendo got the message, but with the dozen first party games that got free patches it was clear this was a new era for them. I’m playing Pokemon Violet right now after beating Scarlet a few years ago and it’s like a whole new game on Switch 2, all the performance issues are just gone.