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RolStoppable said:

A console manufacturer who funds a game gets to call the shots, so they are 100% responsible for the quality of the resulting title, even in a case where they choose to forego their rights as a publisher and completely hand the reigns to the development studio.


In reality, the resulting game is first party (since it is funded by the platform holder who usually owns the resulting IP), but the term helps to distinguish independent studios from those directly owned by the platform holder. These studios may have exclusive publishing agreements (or other business relationships) with the platform holder, while maintaining independence.