Why Nintendo Didn‘t Buy Rare: A $375 Million Decision They May Still Regret

Nintendo‘s shocking decision to sell beloved second-party developer Rare to Microsoft in 2002, rather than buy out the studio and keep them as an internal team, may have been a pivotal mistake that prevented Nintendo from competing with Sony and Microsoft in subsequent generations. Rare was responsible for some of Nintendo‘s biggest hits, and losing them left a creativity and quality gap that Nintendo still struggles to fill.

Rare‘s Storied History and Wild Success on Nintendo Platforms

Rare made up 51% of Nintendo‘s software sales on the Nintendo 64. Their games scored an average Metacritic rating of 88, a full 10 points higher than Nintendo‘s own first-party average. Classics like Goldeneye 007, Perfect Dark, Banjo-Kazooie, Donkey Kong Country, and Conker‘s Bad Fur Day defined genres and expectations on Nintendo‘s fifth generation console.

Rare also delivered critical successes on Nintendo‘s portable and previous platforms. Killer Instinct became a surprise Game Boy hit in 1998, selling over a million units. On the SNES, Donkey Kong Country shifted 9 million copies while boasting revolutionary pre-rendered 3D visuals. This small studio in the UK had an uncanny knack for developing Nintendo‘s key franchises into exciting new directions.

Below is a sales and review score snapshot of some of Rare‘s Nintendo hits:

The Internal Changes Driving Nintendo and Rare Apart

In light of their past success together, why would Nintendo allow Rare to be acquired by Microsoft in 2002? As reported by GamaSutra at the time, both Nintendo and Rare saw their strategic priorities shift.

Nintendo wanted to move towards solely developing their largest IPs like Mario, Zelda, and Pokemon internally, ending close relationships with outside studios. Meanwhile, Rare founders Tim and Chris Stamper were " Indianapoliskeptical about Nintendo’s plans" for the Gamecube and wanted to develop multiplatform games again, directing Rare‘s future.

Letting Rare go against Nintendo‘s wishes was an early sign of strategic differences between the two companies. This foreshadowed issues Nintendo would face by rarely collaborating with outside studios in the future console generations.

Rare‘s Post-Sale Decline – A Cautionary Tale for Nintendo

In the 15+ years since Microsoft acquired Rare for $375 million, the studio has failed to come close to reproducing its former glory days:

• Rare struggled through 3 console generations with only 1 breakout hit – Viva Pinata for the Xbox 360
• Several major projects were canceled outright – including Perfect Dark Core and Killer Instinct 3
• Since 2015, Rare has primarily been relegated to minor yearly releases like Sea of Thieves that fail to match old Rare quality

Meanwhile, during the 2000s, Nintendo lacked a strong pipeline of second-party developers compared to Sony, instead doubling down on aging franchises and Mario spin offs to fill release slates.

Letting Rare go exemplified a stubbornness and inability to adapt that has hurt Nintendo, especially during the failed Wii U era. If they had bought Rare rather than sell, it may have infused much-needed creativity as Xbox struggled through the Xbox One generation.

The $375 Million Question – Did Nintendo Make a Regrettable Mistake?

For many Nintendo fans, the Rare sale is the prime example that shows Nintendo can lack the long-term vision needed to stay competitive across decades. Even with the Switch‘s current success, they still lean too heavily on 30-year old franchises instead of investing in new series.

Some may compare the Rare deal to Disney purchasing Pixar Animation. By bringing in outside creative forces and empowering them, Disney cultivated multiple $1 billion film franchises that reinvigorated their brand. Nintendo could have done the same with Rare.

Overall, the evidence suggests Nintendo gravely underestimated Rare‘s value as a beloved second party studio. Failure to purchase them outright seems short-sighted for a company that claims to be focused on cherishing fans and gameplay innovation above all else. Over two decades later, Nintendo is still struggling to fill the void left behind by Rare‘s departure to Xbox.