I'd like to get to the bottom of the whole 3rd parties snubbing Nintendo issue. To do so I'd like to take a trip in the past.
- Nintendo's 3rd party policies
Back in the NES days, Nintendo developed an iron-fist policy with 3rd parties in order to ensure quality in the games that made it to their platform. Some of these policies included having to use Nintendo's cartridges, only releasing a certain amount of games a year, and other such strict regulations. This was needed at the time, as Nintendo's empire grew at the wake of a video game crash in the west just 4 years prior to the release of the NES.
On the other hand, some regulations were less beneficial for Nintendo. Examples are content censorship, from removing certain language to eliminating graphic blood. The reason for all this it seems was to make Nintendo's console more family-friendly. In the process, this cause two things: devs felt unable to express their creative freedom, and they felt like Nintendo was babying the industry. This, compounded with Sega's agressive marketting taking advantage of that, painted Nintendo in a light that has never really left it, as the kiddy company. Then, another policy that made things feel tyrannic was that there were rules about being unable to release games for competing platforms. Needless to say the policies above, whether good or bad, made 3rd parties want to stay as far away from Nintendo as possible, if possible. When competitors offered a haven from this and a viable platform (first the Sega Genesis to a lesser degree, then Sony's Playstation), things changed radically. By the time the SNES came out, most of these policies were gone (except the content one as we remember from Mortal Kombat), but the harm was already done.
- Sony-Nintendo CD-console debacle
Back when Sony was working with Nintendo on the hybrid CD-based SNES, Nintendo was the leader of the industry, with most 3rd parties still on board, though many had gone to Sega despite the SNES' popularity mostly due to the policies mentioned above. Sony approached Nintendo to make a CD-based SNES, which Nintendo wanted. Nintendo was keen on jumping in on the CD technology at the time, whether it was with Sony or not. However, after a long story of backstabbings and who said whats, Nintendo decided to do away with the CD-Roms and stick with cartridges.
Again, needless to say, this hurt Nintendo a lot. The CD-roms were an excellent medium for the time to allow lots of content for games, from orchestrated music, to FMVs, to lushious 2D visuals. Many multiplatform games were much more desirable on the Playstation than they were on the N64, examples of this are Tony Hawk's Pro Skater which yes had better graphics on the N64, but lacked the full music tracks which, for a new skateboard game like Tony Hawk, mattered. This is a bit the origin of why Nintendo gets less in ports, devs got used to it in the PSX days. Final Fantasy VII alone can be attributed to this reactionary decision of Nintendo's. This was the beginning of lost 3rd party support from main japanese developers. This decision also caused the royalty scheme to stay antequated (NES/SNES style), while Sony's partners enjoyed a more relaxed royalty scheme due to reduced costs in manufacturing the games, and hence more margin for publisher and manufacturer to share in.
- The Playstation makes HW from other manufacturers look hard to develop for
While in the NES/SNES days, games were just hard to program no matter the platform (Sega, Neo Geo, ...), when Sony's Playstation came in, it came with the promise of making games easy to make. Apparently this was the case but I need a source for this. Another attractive feature for 3rd parties.
- The Gamecube's mild success
In the wake of the Playstation, the Gamecube looked to remedy a lot of the HW mistakes Nintendo made with the N64. Gone were the cartridges, in was the disk, in was the ability to do everything the PS2 could do, and ease of development. However, the PS2 had gained so much momentum to leave the GC in the dust for anything that wasn't a Nintendo 1st party game or a AAA 3rd party exclusive. Most multiplats didn't cut it on the cube, and given Nintendo's past popularity this didn't look good.
- The Wii's abandonment
The Wii's situation is a lot different. Despite everything that happened before, with the Wii, gone were all the policies that gave Nintendo such a bad name. On top of that, the Wii enjoyed an explosive success as of its launch due to 1st party offerings. However, due to everything that happened before the Wii, 3rd parties were already gearing up to support the Playstation 3. Also interestingly, 3rd parties were supporting MS' 360. We're not entirely sure why the 360 saw so much support in contrast with Nintendo, but at the time, the main thought was that Microsoft was giving incentives to work on their consoles. Money incentives. The 360's PC-like architecture also attracted many western PC devs, which helped MS' cause.
Sony also joined in the money game and competed with Microsoft, so as to compete in exclusive content after the weak PS3 release. Both manufacturers courted the desires of 3rd party publishers which was to offer high-end consoles at a low price. As such, both Sony and MS lost a lot of money on loss-leading strategies with their consoles. Meanwhile, the Wii was the market leader by a landslide, but it was not seeing support from 3rd parties nonetheless. The rest is history.
Other things I've read in the past