If that was the reason, then Lucasarts should pull out of the entertainment business.
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Just imagine a Star Wars film where Luke, Han, Leia, Chewbacca, C-3PO, Artoo, and Lando all die...I'm certain everyone would love that film because it just brought out all their emotions...NOT.
In truth, some of the people wanted their characters to die...but Lucas didn't have it...because that's missing out on his vision of Star Wars.
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If true, how could Lucasarts then allowed Bioware to do the DS ending of KotOR?