I agree that Nintendo should have done that, yeah (keep Rare, etc.). Nintendo's move to boost Japanese developer support, that they did during the GC generation, was a good move -- the N64's Japanese third party support was really, really bad, so the move was needed. They just made a major mistake by allowing their Western relationships to fade away at the same time, and by shifting most of their first and second party stuff to Japan too -- remember that they parted with Rare, Silicon Knights, Factor 5, and Left Field by the end of that generation, and replaced them with nobody nearly as important or productive (Monster Games, Next Level, etc? Yeah, they're not exactly Rare.). They did start up Retro, and they're great, but they're just one team, and take a while to make their games... Nintendo needed to keep up the N64's focus, but also do that Japanese development boosting that they did on the GC. That would have been ideal.
I also think that Nintendo made a mistake by abandoning the N64 early in the West; yes, the PS2 had taken the wind out of its sails after its release, but even so, Nintendo gave up on the N64 in Spring 2001. That left a six month gap between that, and when the GC finally released, with only the GBA and a handful of third party games releasing on N64. Meanwhile, games that should have released here like Sin & Punishment and (yes I know it'd have required work, but I think it could have paid off) Animal Forest/Crossing were left only in Japan... sure N64 sales were fading, but Nintendo's abandonment of the platform was part of why that happened! I know Nintendo of Japan wanted to move on after its lack of success there, but they should have kept it going a little longer here in the US.
Thinking about it, because Nintendo had had that market on the N64 I'd like to think that there was a way to keep it, but MS+Halo is just such a tough obstacle to get past... but yes, that they didn't try at all was definitely not smart. Nintendo of Japan somehow didn't realize how important making more of an effort to hold on to that market was. Yes, they did some things like ED, RE, MGS, etc, but those were really more things aimed at the Sony audience, not the Microsoft one, and it's MS that dealt the biggest blow to the Gamecube in the West, not Sony, I think; I mean, the PS2 was unstoppable, it was going to win by a huge margin anyway. Games like those aimed at the Sony audience were helpful, but weren't going to decide their success in the West. Xbox vs. Gamecube for second, though? That was more of a fight, and Nintendo basically ceded the ground Microsoft then took.
Actually, I think that that's an important point now that I think about it... I've said before in detail about how what happened was that MS took the shooter/"hardcore gamer" Western audience that Nintendo had with the N64 away from them with the GC, and that Nintendo failed to respond, but adding to that, the games Nintendo did have were more aimed at Sony than Nintendo. What did Nintendo have for that Microsoft audience? Metroid Prime 1 and 2, Geist, and that's about it, yes? Those games were fine, but nothing like that was available at launch, and Nintendo failed to get them to succeed like MS did, for all kinds of reasons. But anyway, I do think that that's what happened.
PD did sell very well, but GE0007 had sold more than twice as much... it's a big dropoff.
