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I have explained it before, and I will explain it again. Rare didn't fall from grace, because Microsoft acquired them. It was a long time coming, and well under way by the end of the 64s life cycle. The developer wasn't exactly pumping out its greatest titles near the end of their time with Nintendo. It was equal parts success on their part, and a major failure on the part of Nintendo. Rare a second party studio should never have been a position where it was matching the first party title for title, but that is what ended up happening. The studio was just run right into the ground for all intent and purposes.

First it was overworked, and then it was out positioned. Everyone forgets this was a developer that was familiar with developing for cart formats, and was suddenly thrust into discs years after most studios had made their own format transitions. They really got tossed into the deep end, and ironically for all the bitching and moaning that surrounds Microsoft buying the studio. Chances are it would have collapsed under the pressure if it hadn't been pulled away from the brink. Rare just wasn't doing very well when Microsoft came along.

Honestly I think Rare is in a position to have a real breakout, and I actually think the turning point was the game that people mock. The reality is Nuts and Bolts though not popular was very innovative in its concept. Which isn't a bad concept if it were worked into a Mariokart like game. The notion of building vehicles with different handling qualities in a kart combat/racing game could be hugely successful. So I don't think the innovation is lacking it is just a matter of implementation.