I believe MS gave up on Rare after Nuts & Bolts shipped and bombed. Rare even expected it to bomb given the dialogue found in the game:Ghost said:I really want to think that Rares set up is too good for MS to give up entirely, but with what they've got them doing now and the state of the UK industry now the tax breaks are shelved...worrying times.
Mumbo: "Bear must add floaters to boat otherwise boat sink like this game at retail"
Everything went downhill from there. It's not like Rare lacked ideas they had the wand for the Xbox Live Cam, MMO, Perfect Dark 2 and a bunch of other new IP's and sequels that they wanted to work on but MS never greenlit anything. I bet MS realized that funding games like Perfect Dark 2 to be the next 'killer-app' with Halo-like marketing and production values just wasn't worth it when they could just ship a Halo game every year.
Rare became 'old hat' so to speak and with most of their core fanbase on another console and games like Call of Duty and Forza taking the headlines there was little reason to focus on hit games from the studio.