That's true, but Sega isn't Rareware. Look at their history. Sega released a lot more than just one game a year back when they were making games for their own system. To the best of my knowledge, they didn't delay nearly every single game that they developed. I don't know why that is. Maybe Sega is just more efficient or they are a bigger company (since they are made up of several different teams) or maybe they are less of a perfectionist than Rareware. Be that as it may, Sega historically has a greater output than Rareware, and that's why they can survive in the third party world. I still contend that Rareware wouldn't be able to do it. They don't know how to meet reasonable deadlines. They could eventually do it, I suppose, but for a while after going third party, I think the quality of their games would drop.
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Rare wouldn't have to cancel any games to go third party...
In the SNES days, Square was a third party, but they still made Mario RPG...
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And you think Squaresoft was able to do that without Nintendo's permission? Do you think that Nintendo would allow Rareware to take Donkey Kong Racing to the PS2 or Xbox? For that matter, I think Nintendo actually owns Rareware's original franchises like Perfect Dark as well. Squaresoft made Mario RPG because Nintendo gave them the license to do it.
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I don't get why everybody is acting like Rare is an Important developer for Nintendo financially... think about it, they only made two true big sellers for N64 (Goldeneye and Banjo)...
When Perfect Dark (and Conker, [and Resident Evil..but that's not Rare]) flopped on the sales charts 3rd parties decided to keep mature games away from Nintendo.
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Well, Goldeneye and Banjo sold lots of consoles which means that Nintendo had a wider audience for their own games. Sales for lesser known games like Jet Force Gemini and Blast Corps are nothing to sneeze at, either. And I'm pretty sure Donkey Kong 64 sold decently (even if it was just on hype).
3rd parties had decided long before Perfect Dark to keep mature games away from Nintendo. Lots of mature games had already flopped. True, they flopped because they were bad, but nonetheless, Nintendo's image as the family oriented company was well established by the time Perfect Dark and Conker were released. Even if they had gotten Goldeneye numbers, I doubt that we would have seen a sudden surge of mature 3rd party software. It was simply too late in the N64's life cycle.
It's hard to quantify Rareware's worth to Nintendo, especially since I'm not an economist or financial analyst, but I think it's safe to say that the loss of Rareware would be a stunning PR blow to Nintendo. And the consequence of that would definitely be a major financial hit.