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All the fault of this is on Nintendo side. Ever said that. Microsoft has no fault: they have not a gaming history legacy as game developer like nintendo do, the artistic support that Microsoft could provide was quite different from the Nintendo one.

Rare, at the time of N64, totally saved Nintendo's ass, they saved 1997 Christmas (with Goldeneye 007 and the surprise of Diddy King RAcing, presented for the first time like an almost complete game 1 month before its release, incredible) and for long time Rare was the only company that supported the platform continuosely with great number of great quality games (Diddy Kong, Goldeneye, Blast Corps, Killer instinct just the first year of the console, then Jet Force GEmini, Banjo, Banjo Tooie, Conker, Perfect Dark, really an incredible amount of great AAA titles).

It was incredible, at the time, how Nintendo cleaned their hands and not saved Rare. At the time (15 years ago, I still remember that day) it was really shoking. They totally saved Nintendo back in the N64 era and now Nintendo was looking them collapse not moving a single finger.

It was all Nintendo's fault and they lost their most precious second party team, and one of the few western company that provided different kind of games on their systems.