Since the NES debuted in 1985, Nintendo’s had a notorious relationship – or lack thereof – with third-party publishers. With each subsequent console, Nintendo-published games have thrived while publishers have struggled to reach the success they find on other consoles no matter how well the Nintendo hardware sells.

Former EA executive and current Kleiner Perkins Caufield & Byers partner Bing Gordon chalks this up to the company’s fierce sense of independence. "My sense is that companies have cultures, and Nintendo’s culture has always proudly been ‘we’ll do it ourselves and if everybody else wants to jump on they can,’" he says. "Nintendo’s been about margin and control rather than market share."

No decision has reflected this go-it-alone philosophy more than the debut of the Wii MotionPlus in 2008. When the company announced the controller enhancement at E3, several third-party developers were as surprised as the press – Nintendo never bothered to notify them of the new technology. As a result, the MotionPlus received almost no software support at retail, making it less attractive to consumers.

Dealing with the company’s erratic support has tested the patience of some partners. Speaking to IndustryGamers, Electronic Arts CEO John Riccitiello admitted, "It’s a frustration for all third-party publishers when a platform holder does less to promote third-party content." He also pointed to the company’s less than convincing track record, saying Nintendo has never made a console that’s been "a heavy third-party supporting system. It’s not lack of trying; they start the morning thinking what’s best for their own intellectual property."

But Gordon understands why Nintendo makes the decisions it makes. "If you work with third parties, you don’t have control of your own fate," Gordon says. "Microsoft bought Bungie to do Halo. All it had was Halo and a bunch of crap. When Sony launched the PlayStation it acquired Psygnosis in Liverpool. Commodore Amiga launched with no first party. [Does] having enough first party guarantee success? Nintendo’s got Miyamoto, and he could do a game that could single-handedly drive 10 percent market share, so they got in the habit of retaining control. They never had that awkward feeling of having to depend on other people for their success."

The Third-Party Gap
In looking at the number of third-party games that rank among the top 20 game sales for each platform as provided by the NPD Group, the Nintendo dilemma for those publishers is evident.

PSP: 16
PlayStation 3: 16
Xbox 360: 15
Wii: 7
DS: 2

As long as Miyamoto is making games for Nintendo it doesn’t have to rely on third-party publishers to find success, but the company is leaving low-hanging fruit on the revenue tree. Good third-party games can increase consumer interest in the hardware, which in turn sells more software. Console manufacturers also receive licensing fees for every third-party game sold. "It really is pure profit," Reggie Fils-Aime admitted to Fortune in 2007. "Third-party games can really determine who wins." So what’s taking so long for Nintendo to develop a cohesive third-party support system?

Recently Nintendo president Saturo Iwata acknowledged the problem during a press conference and pledged to do a better job of supporting its partners going forward. "It is true that the third-party software sales ratio on Nintendo platforms are comparatively smaller," he said. Wii’s third-party software ratio is especially low.

"We need to decrease the concern that only Nintendo software can sell well on Nintendo platforms and third-party software cannot sell in the same volume. We will not make a trend similar to the one found for Wii in Japan now," he promised. "We feel a need to have closer ties with our third-party developers from the beginning."

The company is trying to mend these relationships starting with the 3DS launch. According to Nintendo of Europe’s Laurent Fischer, there are currently around 70 first- and third-party games in development for the emerging handheld.

Nintendo’s lack of third-party support hasn’t helped, but in the eyes of 5th Cell executive director Joseph Tringali, it’s not the only reason publishers rarely find success on its platforms.

"They set themselves up to fail because there’s this juggernaut Nintendo and a lot of the publishers say, ‘We’ll never compete with Nintendo, we can’t do it,’" he says. "It’s like they’re talking defeat into their strategy before they even start, instead of asking ‘What is Nintendo doing and why are they successful?’ Rather than their marketing advantages and point of sale advantages, they make games for their platform and for their audience. A lot of times they have a unique element to it."

When Tringali speaks, publishers and developers should listen. The 5th Cell is one of the few third-party developers that has found repeated success on the Nintendo DS, with Drawn to Life selling 3.5 million units and the Scribblenauts series reaching 2.5 million.

Wedbush Morgan analyst Michael Pachter agrees with Tringali. “The Wii has been a tough platform because most publishers have failed to understand the audience,” he says. “Nintendo has had great success, as it clearly knows its customer. Other games (let’s call them ‘mass market’), like Guitar Hero, dance, and fitness games have thrived. I think that we’ll see more games like these in the future.”