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I bet it was fucking GT Interactive, the bastards.
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Nope, it was Microsoft. They forced Munch's Oddysee to have their tone be cartoony and light-hearted to appeal to the Super Mario Bros. crowd, and made the game a launch title (which resulted in the rushed production).
Not really a surprise considering their corporate greed (killing off their free art/movie programs, forcing a paid subscription for Word, forcing Valve to charge for Left 4 Dead 2 maps that were supposed to be free, charging for playing online and resulting in their competitors also cheating their customers, etc.).
GT was bought out by Infograme (now Atari, SA;and was the same company responsible for the Driv3r scam), and probably would have slashed Oddworld's over $3,000,000 budgets.
Really bad circumstances during that time.