I don't know. It largely defies logic.
So many options involved other than just canceling the game.
I mean most people like to pretend like all of naughty dog was working on this game but we know that was never true, but it's established as a primary reason why we haven't seen naughty dog games yet this gen, despite them just releasing a game in 2020 at the same time as Sucker Punch, but no one treats Sucker Punch the same way.
Not everyone was working on the game, but it's undeniable that at least half of the studio was.
We now know through the newest documentary that TLoU Part III was not worked on in any meaningful capacity.
Most of the 2020-2021~ was when the next Naughty Dog IP was in the conceptual phase and then pre-production.
Almost everyone else was on TLoU Online.
I digress, the answer given for why it was canceled doesn't make sense.
They could have released it as free multiplayer for TLOU P1 and/or TLOUP2 or even as a 10 dollar DLC.
They could have farmed out the development of the game to another studio.
They could have built out the studio to handle the GaaS on top of the traditional development.
Let's be real those options are almost never considered for a studio/publisher.
Option #1 is laughable, does damage to the brand.
Releasing an unfinished and inferior product when you were promising the moon to players is a dumb idea.
Publishers in video games, movies, etc... All keep a vault of content that will never see the light of day because they deem it subpar garbage. Even though millions of fans online will moan that it's unfair that art is being kept from them.
Option #2 has happened a few times in the past, a prestigious entity would think twice before doing that.
A lot of "my way or the highway" type of thinking.
Option #3 They could've. But would SIE allow even more resources into the pit?
This is doubtful considering they were already planning to reduce costs and looking into layoffs at this point in time.
We also know they've begun aggressively axing a few GaaS other projects as well, realizing that many there a few too many bets being thrown around.
I think the game probably ran into some serious issues with size and scope and Naughty Dog didn't want to give it additional resources and they wanted to focus on what they were good at. We all saw reports that Bungie was concerned about the long term monetization of the game, but there had to be more to it than that.
But that's exactly what was said if you know how to read between the lines though?
They literally said it would've come at the cost of what they're known for.
And we know how they were talking a big game about the game being even more ambitious than TLoU Part II with the usual GaaS but also story content being part of the experience.
Knowing what we know about Naughty Dog and feature creep and scoping(Uncharted 4 and TLoU Part II all saw 1+ year of internal delays) it is the least surprising thing ever.
I thought when you said you there was a "bigger story" you meant some real shit.
Feature creep and scope problems killing projects happen to large games every month.
The only difference is that we don't publicly hear about 90% of those.