Lol when I clicked on this I thought it was talking about Rare now as suppose to the great developer they were in the 1990's.

I can't think of another dev off the top of my head that has seen such a drastic decline.

Squeenix... in the 90s and early 00s they could do no wrong.  Today they can't do anything right.

Everyone does realise "2nd Party" means the player right? There's no such thing as a second party developer, unless custom levels on Little Big Planet count.

Games were a lot cheaper and easier to develop in those days. Now you need teams of 100s to make one game, the new AssCreed had something like 10 studios working on it!

BUT that doesn't account for the mind blowing quality they had! They made quite a few master pieces in a period of 10 years.

While I do agree that Rare had excellent management that encouraged creativity and some of the industry's best talent, the truth is they were able to do what they did simply because they were around at the right time. Just think of how inexpensive game development was in the 1990's compared to now. No developer, not even Rare under the Nintendo partnership could make all those high quality games in such a short period of time nowadays. There's a reason why we only see one Retro Studios game every couple of years. There's a reason why Call of Duty gets switched around between developers after each release. Games take more time to make and they're more expensive.

Then there's the development environment. Rare used to have the testing department, where developers who weren't currently working on a game were sent to come up with conceptual ideas for their next game. This is where wonderful gems like Killer Instinct and Diddy Kong Racing came from. The testing department was shut down after Microsoft took over and Rare became the now-industry standard hire and fire company.

just teasing, but Rare really was a special case,

It was an older studio that grew together with Nintendo and they built that relationship over many years & were both well organised.

Is there a Western studio that has had a long standing relationship with Nintendo or has a culture that would mesh well with them?

Also, as people have already mentioned the technology of today is a lot different as is the budgets and the overall market they sell to. 

Square also had an outstanding output of games on PSX* but it would take loads more money and man power to recreate that today.

Development times and costs are way too high for anyone to pump out quality games at the consistancy Rare did in the mid-late 90s. In my opinion Retro needs to get a 2nd full size team, that way we can get a new game from them every 1.5-2 years instead of every 3 years like we have been seeing. The qaulity is there and they have proven they can make great games in more than just one genre. Metroid Prime-First Person Adventure, Donkey Kong Country-2D Platformer, they also helped on Mario Kart 7 and are rumored to be working on Diddy Kong Racing so im assuming working on MK7 helped them learn how to make a solid racer.

It would be great if one team was working on DK Racing for a 2015 release and the other team working on a new Metroid for a late 2016, 30th anniversary release.

Rare was one of a kind. Key word being was.

I think Nintendo needs to acquire/set up another British/European studio. I think I big part of what made Rare games great, particularly Banjo, Conker and Starfox Adventures was the strand of British comedy running through them. (It's actually the only redeeming quality about the Fable games).

No offence meant to any American or Japanese studios, but a European one would bring another cultural voice into the Nintendo stable that it's currently missing.