To be 100% clear, Playstations All-Stars Battle Royale being killed off early isn't Nintendo's fault for Smash being successful. It's Sony's fault for not having the same structure to make it wildly successful.
This reminds me much of what I've seen with the Cinematic universes for Marvel and DC. Marvel scaffolded their entire cinematic universe by doing the groundwork of introducing their heroes and making them independent of each other. What we have now is a widespread, deep set of movies/stories that stay at least somewhat true to the origins. They resonate with fans because it all seems to make sense as the MCU moves forward.
The DC movies...they went too much too fast. They crammed characters with seemingly no backstory into one movie, which is literally the exact opposite of what Marvel did with their big crossover movies.
Now, the properties/characters themselves are solid. Similar to Marvel and DC, Nintendo and Sony have some solid titles. However, I feel it's quite obvious that more than one thing went wrong when it came to PSASBR.
I mean, if we're going to blame Mario and Link for a game with Nathan Drake, Kratos, not doing as well as it could have, shouldn't Nathan Drake and Kratos be able to compete? They're AAA characters in their own right. The success of Mario and Zelda, or even Pokemon for that matter shouldn't impact it. As somebody who was excited for the game, the reason I dropped it wasn't because the roster was all that bad, but because the gameplay made it almost impossible to get truly engaged. Like there's no way I'd ever drop Smash entirely because I grew up with Nintendo, but if the gameplay made me want more, then we're looking at something entirely different.
In Smash, it's very straightforward in terms of what you need to do to win. You smack some people around, you knock them off the stage, you win. PSASBR tried replicating this, and failed. They changed things that didn't need to be changed. The team that made it wasn't experienced enough to get big name characters in, such as Cloud or even Sora. They didn't include key "Playstation" icons.
Though to be honest, another problem with the game is that Sony has always been big because of their 3rd party support. When you make a mascot fighter, the best thing up your sleeve is the fact that your first party catalog is expansive. In that regard, there is simply no company that can match Nintendo. I'm not saying that because I'm a "fanboy", I'm saying it because it's true. The source material matters.
The more characters you don't own, the more money you have to spend to get the ones you want. PSASBR failed because the gameplay wasn't executed well, and while I don't think it's as huge of a deal as some may, there were some key picks pissing from the roster.
I'm almost certain that if the dev team for the game stuck with a system that didn't rely on eliminating your opponents through the usage of (unbalanced) special attacks, the game would be more engaging for players of any skill level. The other thing with Smash is that it's accessible for players of all ages and skills levels. I'm not all that sure that PSASBR.
Basically, PSASBR has issues it needs to sort out before entirely blaming Smash and wishing it would fail. That's like basically throwing most if not all of the blame on the group that's successful and like...what? Yeah, it sucks that someone else being successful then leads to another product not being as successful, but there are always ways to make something accessible, engaging, and exciting for your customers. As a teacher, engagement is just about the most important thing I can focus on. It's not that different with branding your products.
That's just about all I'll say on that. It's not Smash's fault PSASBR underperformed. It's Sony and the dev team.