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Not to mention that at a typical price of $10, that 5,000 threshold is only $50,000 (of which the devs would only get roughly 2/3 anyway), and if that's all you need to break even then you clearly didn't put enough effort into your game.

Nintendo's just making sure they don't lose money on a flood of shovelware by paying off their own costs first. They are basically acting as the publisher in this case and that's a very normal business model in that case.