No, it’s about if you make a game that’s worse or off-brand. If you make a bunch of Mario games into horror games and then everyone thinks of horror when they think of Mario then good or bad, you’ve ruined their branding and image. Equally, if you make a bunch of trash and people see Mario as just a trash franchise (like how most people see Sonic games) then it ruins Nintendo’s ability to capitalize on their own work.
No one is worried about a fan-made Mario game being better.