In an interview with Not Enough Shaders, former Rare modeler Donnchadh Murphy explains the fall of Rare and pins it straight on Microsoft’s lapel. While Rare was known for building a variety of amazing games, Microsoft may have made some changes to their business model.
This decision apparently had an even more detrimental effect after Rare’s founders, the Stamper brothers, decided to leave the company. Despite this loss, Rare still had talented people and they had “numerous projects that were put forward that I [Murphy] believe would have been huge hits, but MS rejected them one after the other”. It only gets worse from here though.
When asked which IP Murphy would be most interested in reviving he had this to say: "Probably the same game every Rare fan wants to see and that's Killer Instinct. We all wanted to make KI3, but Microsoft [was] more interested in broadening their demographic than making another fighting game. So it never got made, I doubt it ever will."
Ouch! I sure hope nobody had gotten their hopes up for another Killer Instinct…
Thanks Ted for the heads up using firstname.lastname@example.org