The reason why MS was viewed as the only viable competitor to Sony was because of the wallet size, in the direction gaming was going, he who had the most money wins, that's the only reason 3rd parties stood behind Microsoft and considered a MS platform to be a competitor to a Sony platform, which they all knew would also be an HD beast.
It's like what Iwata mentioned, Nintendo won't bring downloadable movies to the Wii because they don't compete. Iwata has said that way too many times to count, the point is not to compete, in this case specifically downloadable movies, that job is done by the PS3 very well and as Iwata said, Sony has their own movie studio, and Microsoft has a lot of money.
However in the direction Nintendo has taken, money isn't the major factor it was going to be in the HD direction, that and several other reasons lead to their monopoly level success on first party titles, third parties couldn't have seen it coming unless they were paying to user log ins for yahoo games. Even then he relation probably could only be seen in hindsight.
Shigeru did say he was speaking to third parties about Wii development, and that he noticed they would put their noobies to develop on the Wii and in result the games were horrible and sold horribly. Nintendo's relationship with japanesse third parties was very good by the time of the Game Boy Color, they had working relations with SE and Capcom to my knowledge back then.
If memory serves I remember Sony made a move to buy a large chunk of SE a year before FF7 was released on PSX. ^_^
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