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I think the 2 main problems that Nintendo has is that their first party games are not just super successful, but also have ridiculous legs, so third parties have trouble finding gaps to release games when the mentality of almost all the other companies are for front loaded sales.

The other problem was that development costs are so high now that companies can't really take chances like they used to and be as creative. I mean if by the logic that first parties dictate the market for third parties, PS1 and PS2 would have been dead in the water