Nintendo sold off one of their long-standing high profile development houses. How will it pan out?

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A Rare Purchase

While many people close to the gaming industry saw this coming, now it’s official: Microsoft owns Rare. At its most basic level, this is just another business deal – a larger company swallowing a smaller company. It happens every day. But this one is different. This is one acquisition that kept me awake as my mind raced down each possible scenario – where it will end and what it means, not just for console gamers, but the gaming industry at large.

My first concern was for the games. Would there be sequels to Perfect Dark and Conker’s Bad Fur Day? Above everything else, Rare has a nearly flawless record, with games that are not only highly playable but often become instant classics. These fears were unfounded as the terms of the $345 million cash purchase also included the rights to the characters that Rare has created. (I think -- see the official releases below.) According to most reports, Nintendo had a 49% stake in Rare and there was some question as to who owned the rights to the characters – at least in my mind. Those looking to play the Perfect Dark sequel will have to own an Xbox. That’s the nub of the matter – Rare games are going Xbox exclusive. But the games are still coming and that was my biggest concern.

In terms of GameBoy advance development, Rare has a few games yet in the pipe and will be released, but after that who can tell what will happen. While the GBA isn’t in direct competition with Xbox, it is a Nintendo product, which does have a big stake in the GameCube, which is in competition with Xbox. It’ll be interesting to see how this aspect plays out.

What I’m about to say is coated with heavy speculation.

Nintendo will leave the console wars after GameCube development trails off. I base this on at least three clues. The first is the official Nintendo mantra of, “It’s all about the games.” If it truly is all about the games, then why bother creating another platform beyond GameCube?

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Nintendo has been producing hardware since about 1984 with the Nintendo Entertainment System through the Super Nintendo Entertainment System, N64, and now GameCube. The NES and SNES met with huge successes and made for some good competition with Sega – the early years of the Console Wars. The N64 met with a huge fanfare when it launched thanks in part to a 3-Dimensional Mario, but then seemed to get thrown into neutral.

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Some cited a lack of support for it’s gradual decline, never mind such titles as Majora’s Mask and the under-appreciated Conker’s Bad Fur Day that came late in the life f the N64. And now GameCube, which is receiving solid support but with the loss of Rare – releasing Rare’s last Nintendo title, Starfox Adventures, and somewhat overshadowed by Microsoft’s announcement – there should be a warning bell going off somewhere. Plus, the fact that Nintendo has declared Rare’s declining importance as a developer for Nintendo. This seems out of whack and shortsighted.

Looking at the history in this regard shows a flawed logic. The last Rare game for the N64 was Conker’s Bad Fur Day. The N64, already on its last legs (in terms of retail sales), didn’t have that many M-rated games and when Conker hit store shelves it was under a very explicit advertising campaign that it wasn’t for kids. The thing is, Nintendo hit a demographic that, in large part, didn’t own an N64 because of Nintendo’s kid friendly image. The sales of Conker were said to be weak, even though it was a strong game and did hit an older audience (as intended). The GameCube (in North America) is quickly approaching its first birthday and only now have we seen Rare’s first (and last) GameCube offering. So, technically, yes, Rare has had a declining importance because they haven’t produced more than two games in two years for Nintendo. But saying Rare isn’t important -- cutting ties with them a business decision? Goldeneye sold more than 8 million copies. What's really going on? If it's all about the games why sell out when Rare is such a hit-maker?

(Currently Rare is working on Kameo for Xbox – which, until recently was labeled a GameCube game on Rare’s website.)

The second clue that Nintendo will remove itself from the Console Wars is the phenomenal success of Gameboy and Gameboy Advance. Nintendo’s hand-held system has no competition. At one point it did, but the competition either couldn’t maintain momentum or just simply collapsed. (Remember the Atari Lynx? Sega’s Gamegear?) GBA is everywhere and it just keeps getting bigger so anyone entering the handheld market is more likely to get ploughed under than make any gains. If Nintendo pulled out of the Console Wars, it can go about ruling it’s Hand-Held Empire. While technically, they’d still be producing hardware, GBA isn’t in direct competition with any other console.

Clue number three is a biggie. Officials high in the Nintendo echelon have been quoted as saying they wouldn’t mind switching to software only development. The key here is that they’ll choose this course, and not be forced into it by internal financial meltdowns. When this happens, all bets are off as to what will happen. Would it develop just for Sony’s platforms or would it be a free-for-all? Would its software development be bought outright? Regardless, the loss of Rare signals a shift for Nintendo – a slow wind down to software only development. Just image. You might be playing a Mario game on a PS3 or an Xbox 2. (You’ll get the same willies you got the first time you saw Sonic on GameCube.)

(But what does all this mean to Sony and Microsoft? Obviously, Microsoft is cheering -- after all, what's $345 million? A bargain! -- but it’s hard to image what Sony is thinking.)

If Nintendo plays things right, getting other developers to fill the void left by Rare – even if they think it’s a small one – is of utmost importance if they want to stay in the hardware game. With developers like Silicon Knights (Eternal Darkness) and Retro Studios (Metroid Prime), and with more commitments from Capcom, Nintendo might be able to avoid going down that route. But like everything else, this is up for speculation. (Or read the official releases below -- pay attention to the dates on the releases -- and make up even more wild theories!)

- Omni

(September 25, 2002)

NINTENDO CUTS DEVELOPMENT TIES WITH RARE, LTD.
Decision Reflects Strategic Move To Expand And Redirect Game Development

LONDON, United Kingdom (Sept. 20, 2002) -- As part of a strategic redirection of its game development investments, Nintendo announces it has sold its 49 percent ownership position in U.K.-based developer Rare, Ltd.

"Nintendo had the ability to continue its exclusive relationship with Rare, but in looking at the company's recent track record, it became clear its value to the future of Nintendo would be limited," says Peter MacDougall, executive vice president, sales and marketing, Nintendo of America. "In other words, we passed on this opportunity for very good business reasons."

In fiscal year 2001, Rare accounted for only 9.5 percent of total Nintendo software sales worldwide. In fiscal year 2002, that number declined to 1.5 percent.

Nintendo will retain exclusive rights for all original properties and franchises featured in games developed by Rare, including Donkey Kong, Diddy Kong and Star Fox.

According to MacDougall, game development is, by nature, dynamic. Relationships continually change to meet the needs of both manufacturers and publishers. "The disposition of this investment leaves us in a position to become even more aggressive in expanding our development capacity, both internally and externally. Aside from several partnerships already announced over the past year, we are currently in similar talks with several other prospective partners around the world."

In the past year, Nintendo has added emphasis on games which offer true innovation to video game players, and especially those with appeal to older players. Key current and upcoming Nintendo GameCube titles include Eternal Darkness: Sanity's Requiem, Animal Crossing, Metroid Prime, The Legend of Zelda and Capcom's upcoming Resident Evil series exclusively for Nintendo GameCube.

"Although we declined the opportunity to continue our exclusive agreement with Rare, this announcement does not diminish our respect for their work or the past contributions they have made to Nintendo," adds MacDougall.

Microsoft Acquires Video Game Powerhouse Rare Ltd.
Developers of Such Worldwide Hits as “Donkey Kong 64,” “Banjo-Kazooie,” “GoldenEye 007” And “Perfect Dark” Bring Their Talents to Xbox

REDMOND, Wash. — Sept. 24, 2002 — Microsoft Corp. today announced it has purchased U.K.-based Rare Ltd., one of the world’s leading video game developers, further demonstrating Microsoft’s commitment to providing the most innovative interactive experiences available on its Xbox™ video game system. Rare has been the mastermind behind some of the most popular video games in history, including such global multimillion sellers as “GoldenEye 007,” “Perfect Dark,” “Banjo-Kazooie” and “Donkey Kong 64.” Under terms of the $375 million cash transaction, Rare will today begin creating exclusive console gaming blockbusters for Xbox.

In a statement made from Seville, Spain, where the announcement was made to both a live and worldwide webcast audience during the company’s annual X02 event, Chris Stamper, chairman and technical director of Rare, said, “Our mission at Rare has always been to make the industry’s best games for the widest possible audience. Teaming with Microsoft gives us the best opportunity to accomplish this goal. Microsoft’s dedication and commitment to game creators, research and development, and to gaming innovation made them the obvious partner to take Rare into the future.”

“We’ve always insisted on pushing the envelope when it comes to creativity,” added Tim Stamper, co-founder and creative director of Rare. “And now we get the chance to create for Xbox.”

Rare co-founders Chris and Tim Stamper and their talented team of game developers and designers will continue to work out of Rare in Warwickshire, England. Rare was founded in 1985 as a partnership between the Stamper brothers and Joel Hochberg, now Rare president.

“This partnership significantly broadens our already outstanding portfolio of games that will be available for Xbox. And it also broadens our reach internationally as gamers around the world have demonstrated their fanaticism for what Rare consistently produces,” said Robbie Bach, Chief Xbox Officer at Microsoft.

“The last time I was this excited was the first time I picked up a controller and played a game from Rare,” said Ed Fries, vice president of Xbox Game Content at Microsoft. “As a gamer, you could hardly wait until Rare’s next title was announced. You didn’t know what genre it would be, but it didn’t matter because you knew you were going to love it."

Rare grabbed the attention of the video game world in 1994 with its creation of “Donkey Kong Country.” Selling more than 8 million copies, “DKC” went on to become the biggest- selling 16-bit title in history.

Rare became one of the premiere developers in the world, with sales averaging 1.4 million units per title and nearly 90 million games sold since the company was founded. Five of the top 20 all-time-best-selling N64 titles were developed by Rare, including “GoldenEye 007,” the second-best-selling game in North America, with worldwide sales topping 8 million.

With today’s announcement, Rare becomes the latest member of a star-studded lineup at Microsoft Game Studios, joining such prestigious worldwide developers as Bungie Studios, the masterminds behind the smash hit “Halo™,” named Game of the Year by Electronic Gaming Monthly. Rare’s first creation for Xbox, “Kameo,” is expected to reach store shelves next spring. Also under development is the highly anticipated sequel to “Perfect Dark.” The company is expecting to develop at least five games over the next two years in a variety of genres, including racing, shooters and platformers.


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