You mean they would have to customize it for the 3DS . . .
. . . just like they already do for every other platform they support?
:roll:
Not to mention they already have to work around hardware limitations since the PC is more powerful than the PS3/360 which is more powerful than the iPad which is more powerful than the iPhone, so it would just be one more platform for them to maintain. And it's not like they would be doing it for free, either, since presumably there would be a lot of developers interested in licensing the technology for their own games.
I think the real driving force behind Epic's decision is corporate politics. They want something out of Nintendo in exchange for the Unreal Engine, and Nintendo won't knuckle to the pressure, so instead Mark Rein tries to tarnish Nintendo's image by suggesting that they sell underpowered hardware.
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