A second party developer is a company that, while it can make any video game
it pleases, makes them for just one parent company. The parent company usually makes a substantial investment within the second party for the rights to publish the titles exclusively for their console.
A good example of this would be with Nintendo
(which specializes in this type of agreement) and RareWare
. Nintendo bought shares in Rare some years back and now has exclusivity rights to their upcoming games.
On a side note, Sony
recently invested $124M in Squaresoft. Does this make them a second party developer? Not necessarily: Squaresoft may
have signed an agreement with Sony, but as far as anyone knows, they are not exclusive to them.
For information on first party developer
s and third party developer
s, click the links.