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Video games: The early years

I’m sure we’re all familiar with videogames (if not, get the hell of this site). But where did they originate? Many of you may also be familiar with names such as Atari, Pong and Space Invaders, but what about Ralph Baer, Magnavox and – what has the Pentagon got to do with all this? Read on in the first episode of “The history of videogames”.

Ralph Baer has been called "the Tom Edison of video games," and for good reason. It was under his supervision that a team of 500 engineers and technicians built the first video game console in 1966. What is not commonly known is how and why this came to be.

There was not a demand for the product. Only a handful of persons in the world had played previous computer games. Those games were usually variations of a game called "Spacewar" and could only be played on $40,000 computer terminals. Thus the question must be asked, who would have funded such a project? The answer is: The Pentagon.

Baer worked for a military electronics consulting firm innocently named Sanders Associates. In the past, Sanders Associates had been employed by the United States military to design weapon circuitry, wire missiles, and generally develop classified military equipment. In 1965 military strategists came to Sanders with a project. They desired computer simulations to help refine their soldier's military prowess by teaching strategy and magnifying reflex skills. They wanted the system to be compact enough to be portable (portable in those days meaning "luggable" or lighter than eighty or so pounds) and to use relatively inexpensive equipment, namely an ordinary television screen. The project was given high security precautions, as most projects were during the height of the Cold War, and Baer was chosen to head it.

After struggling for months on the project by himself, Baer finally succeeded in getting two white dots to chase each other around a black and white screen. This impressed the military representatives enough to warrant a dramatic increase in funding, which lead to the hiring of more assistants. Originally, Baer hired two engineers, Bill Harrison and Bill Rusch, to work full-time on the secretive "TV Game" project. Together, they worked in a ten-by-fifteen foot windowless office affectionately referred to as "the game room." The office was always locked, and the only people with keys were Baer, Harrison, and Rusch.

As time went by, more and more were employed in the project. Within a year the team had a working ball-and-paddle game. Over the next six months this would evolve into a moderately sophisticated hockey game. By the end of 1966, Baer and his team had a working prototype of a video game console ready to show members of a Pentagon review board.

The project leaders beamed with pride as they switched on the device for those present. The television hummed and slowly blocks of light came into focus. The members of the Pentagon review board were not impressed. They felt that insufficient progress had been made on the project, but acknowledged there was enough reason to continue research.

It was at this meeting that Baer first expressed his personal theory that a device such as this could be a very profitable form of entertainment. The review board, however, felt that the military could benefit from such a technology more than a consumer, and decided that the project was to continue under it's "top secret" classification. It would be four years before a non-military company would be approached with a similar system.
After the military rejected his idea, Baer would spend several years covertly trying to obtain the legal rights to commercially reproduce the game machine he helped design at Sanders Associates in 1966.

Eventually the Pentagon became disinterested in the "TV Game" project, and Baer was allowed to pursue the prospect openly. He approached Teleprompter, RCA, Zenith, General Electric, and Magnavox. A deal was struck with RCA, but later fell through because it involved the purchasing of Sanders Associates by RCA.5

Then in 1970 Bill Enders, who had been a part of the RCA negotiating team, joined Magnavox and persuaded the Magnavox executives to give Baer's system a chance. The result of this was the production of the Magnavox Odyssey, the first home video game system available to non-military personnel.

First generation systems (1972-1977)

The Odyssey had over three hundred separate parts. It came with hand controls, dice, playing cards, and play money. Plastic overlays which were placed onto the screen by the consumer, provided colour playing fields for the various games. The system came pre-programmed with twelve games that utilized all of the aforementioned equipment.



While it could not compete with the Pong units that would be released soon after, the Odyssey did have a very impressive first year, selling over 100,000 units at $100 each.
The real cause for the popularity of the Pong units over the Odyssey was not because of the marketing prowess of competing companies, but rather the creation of low cost LSI (Large Scale Integrated) circuits. These circuits were designed primarily for tennis, hockey, and other Pong-esque game mechanics. The low cost LSI's would allow the market to be flooded by Pong knock-offs.

Nolan Bushnell's first exposure to video games was a game called "Spacewar." Programmed by an MIT student named Steve Russell in the early sixties, this game had circulated computer labs across the country by the time Bushnell would play it in a lab at the University of Utah in 1962. He would spend the next seven years of his life trying to reproduce that game on a smaller, less expensive computer. When it was completed, Bushnell's Spacewar variation (known as "Computer Space") did not sell. Frustrated by this, Bushnell changed his entire perspective on computer game design.

In an interview, Bushnell later said, "You had to read the instructions before you could play, people didn't want to read instructions. To be successful, I had to come up with a game people already knew how to play; something so simple that any drunk in any bar could play."

In 1972, Bushnell quit his job at Ampex in Sunnyvale, California, and with two other former Ampex engineers started his company. Bushnell enjoyed playing the Japanese game "go" and his next suggestion was "atari" which means "check." This name was accepted by the California Secretary of State, and on June 27, 1972, Atari was officially established.

Al Alcorn, one of Atari's first employees, was the engineer who constructed the first Pong arcade game. The game was named after the desired sound that Bushnell wanted incorporated in the game. The dictionary defines "pong" as a hollow, ringing sound, and this was the sound Bushnell felt was necessary in the game.

The first Pong arcade machine was placed in a local bar in Sunnyvale called Andy Capp's. It was more of a trial than anything else, as the unit did not even have a fully constructed case. The following is an account of the first night Pong was in this bar (slightly abridged):
"One of the regulars approached the Pong game inquisitively and studied the ball bouncing silently around the screen as if in a vacuum. A friend joined him. The instructions said: 'Avoid missing ball for high score.' One of [them] inserted a quarter. There was a beep. The game had begun. They watched dumbfoundedly as the ball appeared alternately on one side of the screen and then disappeared on the other. Each time it did the score changed. The score was tied at 3-3 when one player tried the knob controlling the paddle at his end of the screen. The score was 5-4, his favour, when his paddle made contact with the ball. There was a beautifully resonant "pong" sound, and the ball bounced back to the other side of the screen. 6-4. At 8-4 the second player figured out how to use his paddle. They had their first brief volley just before the score was 11-5 and the game was over.
"Seven quarters later they were having extended volleys, and the constant pong noise was attracting the curiosity of others at the bar. Before closing, everybody in the bar had played the game. The next day people were lined up outside Andy Capp's at 10 A.M. to play Pong. Around ten o'clock that night, the game suddenly died."

The reason for this was that the milk carton coin container inside the machine was overflowing into the electronics. After it was emptied, the game continued its usual operation.

Pong would become a huge hit in the arcades, spawning numerous imitations and several official sequels. Its popularity would not die down, until it was replaced by more advanced systems that used microprocessors instead of LSI (Large Scale Integrated) circuits.

America was introduced to the first home video game system on a Sunday night television broadcast hosted by Frank Sinatra. Released by Magnavox and named "Odyssey" this system was little more than a few logic switches, and not considered a microcomputer by the industry. The Odyssey was the result of years of negotiations between Ralph Baer and various players in the television manufacturing industry.

This was not, however, the first time that Americans had seen a videogame. Pong, created by Nolan Bushnell and Al Alcorn (founder and first employee of Atari), had been around for nearly a year in the arcades. Thus videogames were not new. However, a system to play video games in the privacy of your own home had never been seen before.

Nolan Bushnell was not to be outdone, and with simplicity as his motto, he reproduced his popular arcade Pong for home use. Atari Pong, the home version, consisted of one simple unit. It had built in paddles, a built in speaker, and pre-programmed with Pong. Unlike Baer's Odyssey, which had twelve games built in, separate controllers, and graphic overlays, Atari Pong was considered concise by the video game consumer. At this time, consumers did not feel a need to spend more on a system simply because it had more games. It was a common complaint among consumers that systems with multiple games only had one or two desirable games. Thus, Atari Pong and the over sixty Pong knock-offs, would dominate the market until 1977 when it would be replaced by the VCS, another Atari system.



While Atari's profits had been high in the arcade arena, they were not quite financially equipped to permeate the home console market. At the time, the video game companies were either arcade only (such as Baily) or home console only (such as Magnavox). The two markets were dramatically different requiring separate technologies, and distribution networks. Atari's success in the arcade was sufficient to fund the facilities to produce the alternative technologies, but they required the assistance of Sears, Roebuck to gain access to distribution. This would pave the way for the next generation of video games headed by the Atari VCS/2600.

The key occurrance leading to the establishment of a video game specific infrastructure was the deal between Sears and Atari. In 1975, Nolan Bushnell first introduced Atari's Home Pong at a toy industry show. At this show, Tom Quinn, the sporting goods buyer for Sears- not the toy buyer- approached Bushnell and offered to buy every Home Pong game Atari could produce. Bushnell told him that they could produce only 75,000 units. Quinn told Bushnell to double production and he would arrange financing. In exchange, Sears wanted exclusive rights to sell Home Pong through its 900 outlets. Sears would even pay for the advertising and distribution of the units. Had Quinn given the same deal to Magnavox, Atari would have probably gone out of business. Instead, Atari's sales in 1975 were nearly $40 million.

This deal between Atari and Sears would last until relationships between the two soured in 1979 when Sears would produce its "Tele-Games" line, which was a system based heavily on Atari's VCS/2600 architecture. By this time, however, Atari was well established, and with Warner Communication funding it, the video game industry barely felt a jolt.

Second generation systems (1977-1981)

In the Second Generation we see a dramatic change in the desires of the video game consumer. Previously, systems with only a few games pre-programmed were all that was necessary to surfeit the consumer's cravings. The industry wide implementation of the microprocessor first invented at Fairchild paved the way for more complicated systems. These systems produced graphical and auditory effects unlike any that had ever been experience before. While this would be repeated again and again signalling the move from one generation to another, it has been speculated that this first change had the most dramatic effect on the consumer.

The success of Atari in the late seventies would pave the way for Atari's domination of the home market during the Second Generation. Because of a deal between Atari and Sears, Atari had an infrastructure sufficient to flood the new gaming market with their products. Nolan Bushnell, acknowledging the significant improvements over Pong made by RCA and Fairchild, pressed his engineers to create a new system. The Atari VCS/2600 was the result.

The only barrier in Atari's path was money. The production facilities would have to be updated to allow for the manufacture of cartridges, and Atari, despite its dramatic growth in the previous years, lacked adequate resources to accomplish this on their own.

In 1976, people were ready for another form of entertainment. Record sales had plummeted since the late sixties and early seventies, and many music companies were struggling with this lack of interest. One such company was Warner Communications. Steve Ross, the president of Warner, had been vacationing with his children in Disneyland, when he discovered an eight player arcade game. Upon learning that the unit sold for $4,500 and earned $250,000 a year for Atari, Ross contacted Emanuel Gerard, whose job was to acquire properties for Warner. Shortly thereafter, a contract was struck that seemed beneficial to all parties involved. In reference to the deal, Cohen wrote, "Cash-rich Warner was desperate for a hot new product, and product-rich Atari was desperate for cash."

Nolan Bushnell started Atari when he was twenty-nine years old with $250 of his own money, and had sold the company for $28 million in four years. While no longer the president of Atari, Bushnell would remain on the Board of Directors for several years to come.

Funded by Warner Communication and distributed through Sears the VCS/2600 seemed destined for success. Selling for $200, the unit's profit margins were small, but the cartridges were being sold for $20-$40 yet only cost a fraction of that to make.

Sole licensing of Taito's arcade smash Space Invaders and the graphic refinements of an overnight success called Activision would propel the system's sales beyond any previous limits. Atari would even strike unprecedented deals with Paramount for exclusive rights for two of the biggest blockbuster movies of all time, E.T. and Raiders of the Lost Ark.

Atari's success with the 2600 would continue for five more years during which time five billion dollars worth of Atari VCS/2600 systems and products would be sold.

Third generation systems (1981-1984)

Everything was looking up for Atari, but alas it was not to be. Atari's "concern" for the customer backfired on them. In the previous years, there had been a very fine line separating arcade game quality from home game quality. With arcades utilizing storage capacities ten to forty-five times larger than home systems, that fine line became a chasm. Arcade games seemed to be evolving exponentially, while home systems seemed "stuck in a time warp."

The public quickly became uninterested in video game specific consoles, and sales plummeted.
This would mark the end of Atari's reign of the video game market. To this day, Atari has not produced any significantly popular systems apart from their original Pong and the VCS/2600. Since 1985, they have slowly been picked apart by the industry. Splinter companies can be seen everywhere. One of which, known as Tengen, would play a crucial role in the Fourth Generation during some heated legal actions involving Nintendo of America.


Other systems:

The first microchip was created at Fairchild Camera and Instrument by Robert Noyce. This small wafer of silicon would play the most important role in the evolution of video games.3 Because of it, video games would no longer be limited by the number of TTL switches. One of the first systems to contain this technology was the Fairchild Channel F. A small library of titles were produced for the Channel F, but the system never achieved the kind of popularity experienced by the other systems at the time. The Channel F originally sold for $170 with its game cartridges averaging around $20 a piece.

RCA executives had been kicking themselves ever since they let Ralph Baer's system slip through their fingers and into the hands of Magnavox. Because of this, RCA was busy trying to catch up with the video game console explosion of the late seventies.

The RCA Studio II was styled very much after the Pong units of the time, with one glaring exception; it had a cartridge port similar to the Fairchild Channel F. Another less important difference was that the Studio II had numeric keypads for controllers instead of the paddles that were standard among the Pong games of the era.

Both the RCA Studio II and Fairchild Channel F were doomed to failure because of the looming presence of the Second Generation Atari VCS/2600 on the horizon.


Special thanks to The History of Videogames Museum, "A brief history of Home Video Games", Videotopia and "Supercode: A Visual History of the Videogame Age, 1971-1984".

Fourth Generation Systems, 1985 -1989


Welcome back to The History of Games. Whilst the First Generation to Third Generation videogame market had been controlled by America (every system was by an American developer), in the Fourth Generation era we witness the domination of the business by Japan. From here there was a head to head war between Sega and Nintendo, two Japanese companies, and there was little room for previous Generation dominators such as Atari.

Fourth Generation Terminology:

Cartridge (Cart): A box (typically plastic) which contains video game data that can be plugged into a video game system. The cartridge would play a very important role in the Fourth Generation, because the refinement of DRAM (Dynamic Random Access Memory) chips reduced the manufacturing costs of the cartridges. The term "cartridge" would also be shortened to "cart”

Home Video Game System: This term is used to designate systems that are specifically designed for video game use. In other words, when a home video game system is mentioned it can be assumed that it is not in reference to a personal computer. Although there have been many attempts to convert a video game system to a personal computer (mostly in the second generation by Amstrad) a video game system is still a system used primarily for games.

Joypad: The joypad is a variation on the joystick (Second Generation.) While the joystick consists primarily of a rod or "stick" to interface with the console, smaller buttons (usually in a cross shape) were used on the joypad. This design reduced production costs and the smaller profile allowed for simpler packaging.

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Two innovations in the computer electronics industry had to occur before home video games could achieve similar popularity as in the Second Generation. Both transpired in 1984. The first was the reduction in cost of Dynamic RAM (DRAM) chips that allowed programmers more memory than conventional RAM and accessed at much higher transfer rates than magnetic disks. The second was the production of higher power 8-bit processors, which lowered the prices of the pervious chips. This made the two technologies easily accessible to video game companies.
These innovations were ideal for the production of home game consoles that could compete with the ability of arcade machines. Several companies from the previous generations (Atari, Mattel, and Magnavox) tentatively tested the gaming market. However, they simply released updated versions of their older systems. The successes of the Fourth Generation would come from unknown companies with fresh consoles.

Sega was the first of the Japanese companies to try a new system. Created in 1954 in Japan by an American David Rosen, Service Games originally produced coin-operated mechanical games. In 1965, Rosen purchased a Tokyo jukebox and slot-machine maker and adopted a shortened version of Service Games, Sega. During the Pong era, Sega was busy making very popular pinball games. Later, under the direction of Gulf & Western, Sega entered into the video game market with the arcade game "Periscope." They would be an integral player in the industry, eventually suffering during the gaming market crash in the Third Generation. When DRAM chips and inexpensive 8-bit processors became available in 1984, Sega, being headed by Hayao Nakayama at the time, entered the home console market with their Master System. The Sega Master system would sell very well, but its success would be short lived.

The Sega Master System



While they had produced several very popular arcade and home video games over the years (Frogger, Buck Rogers, Congo Bongo) the Sega Master System was the first system that Sega had released in America. Unlike the other systems during this era, the Sega Master System (SMS) had two cartridge ports. One had the standard cartridge configuration, while the other accepted small credit card shaped cartridges. These card games were limited by their size and memory, however, they were typically much cheaper than the normal size carts, and sold reasonably well for the system. The system was capable of utilizing both ports at any given time, and Sega used this feature to produce 3-D glasses for use with certain games. These glasses used little LCD screens that would alternately flash opaque and clear. When choreographed with similar flashings on the screen, it turned some games into an early "virtual-reality" experience.



In a side-by-side comparison of the SMS and NES, it is obvious that the SMS had more potential than the NES. This opinion was shared by video game magazines as well. However, with a mere fraction of the games that the NES had, the SMS would never be able to attain any significant popularity in America. In Europe, on the other hand, the SMS would sell so well that Nintendo of Europe would have to license some of their games to them to stay afloat.




Nintendo of Japan, was originally founded in 1889 by Fusajiro Yamauchi, an artist and craftsworker during the Meiji period. Founded as a playing card company, Nintendo virtually meant "leave luck to heaven." Entering into the video game market in the seventies by joining with Coleco, an American video game company, Nintendo would achieve moderate success through such arcade games as Donkey Kong and Mario Brothers. They would also produce a majority of games for the Third Generation system Coleco Vision. But the gaming market crash at that time would destroy several companies, including Coleco, leaving Nintendo's future in video games uncertain. Teaming up with Mitsubishi to produce watches with simple LCD games built in, Nintendo would tread water for a few years, unable to truly achieve any kind of lasting prosperity. Upon learning of the success that other companies, such as Sega, were having in the U.S. Hirosi Yamauchi, a descendant of Fusajiro's, pressed Nintendo engineers to design their own home console. Yamauchi told his engineers to leave out all extraneous frills to save money and speed up production. The system was rushed by the pressures Yamauchi placed on his designers, and was released no more than six months since the release of the Sega Master System. The first shipments were riddled with defects because of the short design period, thus making many retailers very upset. However, using the marketing data already established by competing companies, Nintendo executives channelled nearly all of the company's resources into advertisements. These advertisements hit the American and Japanese consumers at the exact right time, because sales for the Nintendo Entertainment System would skyrocket over the next few months, and Nintendo would not be able to manufacture enough systems to keep the stores stocked.

Nintendo Entertainment System



The Family Computer (Famicom – as it was in Japan) or the American/European named Nintendo Entertainment System was released in America in 1985, after some limited success in Japan as the Famicom. Over the next few years, its user base would grow exponentially until the NES surpassed the Atari VCS/2600 peak set in 1982. As of 1990, there were over 19 million NES systems in the United States alone.

In addition to the tremendous success of the system, its games had a great deal prosperity. For example, Super Mario Bros. 3 released in 1989 grossed over $500 million just in America. In the field of entertainment, only the movie E.T. has made more revenue. Super Mario Bros. 3 would sell more than 7 million copies in America and 4 million in Japan, which is more copies than any other game in history. Sheff wrote, "By record-industry standards, 'SMB3' went platinum eleven times. Michael Jackson is one of the few artists to have accomplished this feat."




By 1990, the money earned from Nintendo's NES and its games allowed Nintendo to usurp Toyota as Japan's most successful company. In the entertainment business, Nintendo netted as much as all of the American movie studios combined, and more than the three television networks had in the previous two years. In the five short years since the system was released, the NES could be found in more than a third of the household in America and Japan.

This monopoly gave Nintendo significant control over the market during the Fourth Generation, which they utilized in various malicious schemes. Despite all of this, they are still one of the most popular and well-known companies in the world.

Nintendo's only competitor in the 8-bit market was Sega with their Sega Master System. While the Master System did have many more features than the NES (which is evident in a side-by-side comparison) it lacked the third party support that Nintendo had and was not much competition. The Master System sold a total of 2 million units and at times had a market share of 11%, these were the only reason the system survived as long as it did.

The Nintendo Entertainment System (NES) would become the highest selling system in history, and also the most notorious. Nintendo would be involved in the intimidation of retailers, competing companies, and even licensed "partners." They would have countless lawsuits brought up against them, and fill the gaming community with inaccurate rumours and "vapour-ware" for the sole purpose of detracting public attention away from competitors. Ultimately, Nintendo would be brought up on charges of monopolizing, price fixing, and anti-trust violations by District Attorneys from all fifty states, and lose. However, most will agree, that the real loser in all of these battles, was the customer.

Nintendo’s Monopoly

Nintendo has been criticized as being the most "notorious video game company in history." Through their considerable influence in the market during the late 1980s, they were able to control much of the industry using intimidation, scare tactics, and price-fixing. It is interesting to note the events leading up to this domination, and the players involved.
Nintendo, who had been suffering financially since the gaming market crash during the Third Generation, entered the Fourth Generation market with a system that many consider to be inferior to the competing systems of that time. Hiroshi Yamauchi, Nintendo's president, instructed his engineers to leave out the frills of the other gaming systems, and include only the essentials to save money. The system would only have 2,000 bytes of RAM as opposed to the Sega Master System, a competing system, which had 64 kilobytes of RAM. Industry standard graphic processors were dropped in favour of cheaper, less functional, non-standard ones. The push to produce this system was intensified by the fact that the Master System, and other competing systems, had all been in the stores for months, and were achieving great success. When the system was ultimately finished, the defect rate would be as high as 30% per shipment which angered many retailers and turned them against Nintendo (eventually damaging many of these retailers when Nintendo attained the popularity that they did.)
After the NES was released, Nintendo pressed for huge media infiltration of their advertisements, which was something not being done by competing systems. The market had been extremely slow in the previous years, and many companies were very cautious. Nintendo, fuelled by a marketing drive rarely seen, was able to capture nearly 90% of the U.S. gaming market by 1986. This popularity had dozens of gaming companies at Nintendo's door to produce titles for their system. However, because of Yamauchi's foresight, Nintendo had changed the previous "free-market" set up of the industry with the inclusion of something called a "key-chip" in his NES units.

During the preceding generations, a video game programmer would simply purchase the equipment to construct games for a system from the system's parent company. The programmer was then was free to design any game without permission from the company. Yamauchi did not like this freedom given to the designers. So he had his engineers create a chip that would lock out the instruction code from any cartridge, unless that cartridge contained another chip, called a "key-chip." This "key-chip" had a disabling code. The disabling code was then patented by Nintendo and copyrighted. The result was that it became illegal to reproduce the code, without Nintendo's consent. Nintendo then made specific contracts that companies must agree to abide by in order to receive permission to reproduce the "key-chip." This gave Nintendo complete control over its third party licensees, and they used that control to propel the NES farther. Specific deals were made which prevented these companies from producing games for any competing home system. Because of Nintendo's considerable market share, few companies argued with this policy. The result was that many competing systems were driven to extinction because of a severe lack of games. Companies like Atari and Sega could not hope to compete with a system with over 100 new games each year, when they could only produce a dozen or so annually without the help of third party licensees. This propelled Nintendo's domination of the market further.

Aiding in the promotion of the NES, were two sizable companies. Toys'R Us attributed 17 percent of its sales and 22 percent of its profits to the NES and its games. They in turn, helped firm up a deal between Pepsi and Nintendo in 1988 that involved the sale of nearly $10 million worth of Nintendo products to Pepsi, and NES advertisements on the outside of 2 billion Pepsi cans. "In return," Sheff wrote, "Pepsi got the cachet of being associated with Nintendo."
Nintendo began orchestrating game shortages sometime in 1988. This was called "inventory management" by Peter Main, an executive in charge of public relations at Nintendo, but was really to keep the customers on a short leash. By limiting the amount of product available,
Nintendo could keep the demand for the product high. By design, Nintendo would not fill all of the retailers' orders and kept half or more of its library of games inactive and unavailable. In 1988, for instance, 33 million NES cartridges were sold, but market surveys indicated that upwards of 45 million could have been sold. That year retailers requested 110 million cartridges, almost 2.5 times the indicated demand. These practices would greatly benefit Nintendo, but drive many smaller software firms out of business. Certain titles would be produced, then sold very slowly over the span of a year, and the profits would not come in fast enough to keep these small companies afloat. The toy and electronics as well as department stores became dependent on Nintendo, in addition to most game producers. This gave Nintendo a great deal of clout in dealing with companies who were used to throwing their muscle around.

One such company was Child World, at the time, the second largest toy-store chain in the United States. They refused to play by Nintendo's rules, and ended relations with them. By 1989, they were experiencing severe financial difficulties due to the loss of 20% of their sales through video games. They came back to Nintendo, trying to appease them, and were met with open hostility. Nintendo agreed to sell them product again, but they would have to pay for the product a year in advance.

Another Nintendo policy that made retailers furious was their return policy, or lack thereof. Because Nintendo's quality control was boasting a defect rate of 0.9% for hardware and 0.25% for software by 1988, Nintendo executives did not see a need for their previous 90 day guarantee. A new policy was announced to the retailers: no returns. Once a game cartridge box or system box was opened, a refund was out of the question. Concerning this, Sheff wrote:
"Pandemonium followed. One of the largest retailers in the country threatened to stop carrying Nintendo Systems and products. Nintendo refused to change the policy and the retailer refused the products. The retailer held out for three months; after that it crawled back and agreed to Nintendo's terms."

Nintendo's next atrocity would be to use the considerable monopoly they had to control the consumer. Because of the game shortages, consumers would be more concerned about getting a particular title than the price. And because of Nintendo's domineering stance with the retailers, they were able to dictate the expected prices for their games.

In the electronics and computer industry, you can expect equipment to reduce in price over time. When new devices are created that make older ones obsolete, the older devices are reduced in price to compete with the newer ones. This is clearly evident if one simply peruses the want-ads in their local paper and notes the prices of computer systems that were considered state of the art a year previous. This logic applies to all aspects of the computer and electronics industry, including video games. Why then between 1985 and 1989 did the NES only lower $10 in its price?

This was exactly what Attorney Generals from all fifty states were wondering when they began investigating the activities of Nintendo of America in 1989. They found that Nintendo had been fixing the price of systems and games in the stores, using intimidation to influence retailers to abide by their wishes, and were making astronomical profits. Nintendo had been doing this since they first brought out the NES in 1985. They had strived to construct the system inexpensively, however, it was being sold at the same price as the competing systems. An antitrust action was brought up against Nintendo by these same Attorney Generals, and on October 17, 1991, District Court Judge Sweet granted approval of settlement agreements.

Nintendo was ordered to reimburse $25 million to consumers who had purchased systems and games between June 1, 1988 and December 31, 1990. This was to be done through coupons that entitled the bearer to an immediate $5.00 reduction in the purchase price of any NES game cartridge. This was to be for every game purchased by the customer. If someone had five games they would be entitled to $25 in coupons. While they were ordered to pay $25 million, they wound up only paying around $1.5 million. The reason for this was because Nintendo convinced the Judge that they needed to be certain of a consumer's truthfulness regarding ownership of the system before they could reimburse them. The Judge agreed, and allowed Nintendo to make their own terms. Nintendo required that the consumer had three things: the dated store receipt, the UPC code from the original box, and the serial number from the back of the unit. Considering that this occurred in 1991, how many customers do you think still had the original UPC code from the box let alone the dated store receipt from 1988? This is why the refund failed, because only around 300,000 people qualified based on Nintendo's guidelines.

The final problem Nintendo would cause before they were humbled by Sega in the early 1990s, would be to hinder the production of 16-bit systems against the consumers' requests.
In 1988, when it was becoming apparent that 16-bit technology was becoming inexpensive enough to warrant inclusion in the next breed of video game consoles, Nintendo issued a press release that sounded very similar to that fateful statement by Atari made in 1982. Nintendo said, "We feel that the average game player is not mature enough for a 16-bit system, and that the demand is insufficient for it to be a high priority." They were wrong. In the summer of 1989, the first 16-bit system, called Genesis (or Megadrive in Europe) and produced by Sega, would arrive in the stores. By the next Christmas, they were outselling Nintendo's NES 3 to 1 and Nintendo was losing many of their licensees to Sega. This forced Nintendo to reconsider its decision about 16-bit technology, and begin designing one of their own.
When these events are considered with those that occurred during the Third Generation and caused the gaming market crash, the flaws of a single system market become painfully obvious. The fact that more software innovations and higher employment rates in the industry transpired during the Fifth Generation where we find a multiple system market and increased competition adds to this argument as well.

During this time the world was also introduced to the first handheld (or pocket) gaming system. The Nintendo Game Boy was released in 1988 and was a huge success. It’s debut price of $169.99 was quite high at the time, but that did not deter avid game fans from buying it in swarms. Whilst it could not display colour and no backlight meant the screen was often hard to see, the Game Boy was revolutionary and guaranteed Nintendo’s domination of the handheld market (even today no pocket system has managed to sell more than any Game Boy system). It’s selling point was the portable idea – gamers were intrigued that you could take this anywhere. Featuring a wealth of games (the first being Tetris) many remakes or re-releases of NES games – Super Mario Land, Alleyway, (and later SNES games) the Game Boy deserved it’s success. The Game Boy lasted a long time (I bought mine in 1995 – 7 years after it was first released) and since it has died away, newer versions have been released (the latest being the Game Boy Advance with a 32 bit processor).



Of course with the Game Boy’s success, there was little room for other handheld attempts. The Atari Lynx, also released in 1988 was not the success that Atari needed to bring them back on the gaming map. Its debut price was lower than that of the Game Boy and it’s graphics processor and processor speed were higher than the Game Boy (it even had a limited colour palette), but the world’s favourite had already been decided. The Lynx was pretty much a flop being plagued by rumours that Atari was going to desert the system and being unfortunate as to have a lack of third party support, as was the Atari XEGS. Atari’s place in the gaming world was over and it was time they moved aside to make way for the new wunderkind – Nintendo and Sega, who would continue their war in the Fifth Generation.


Special thanks to The History of Videogames Museum, "A brief history of Home Video Games", "The History of Videogames by Gamespot” and of course, my own knowledge which helped me a great deal. Thank you brain, I owe you one.

Hello, and welcome The History of Videogames Part 3. In this instalment I will be going back to 1990, and exploring what is widely considered as the ‘Golden Age of Gaming’. This was a time when great classics were released such as Final Fantasy VI, Sonic the Hedgehog, Super Metroid and Street Fighter II, the former being considered by many as the best game ever. Whilst the previous instalments of this series focused on the build up towards this period, when gaming had a strong foothold in society, most of you were probably too young, or not in existence to remember them. This article should prove better reading, as I expect many of you can actually remember the SNES and Genesis and the war they waged.

TurboGrafX-16



If any one company seemed poised to commandeer control of the video game industry from Nintendo, it was NEC. With a huge and imposing market share in the computer and communication industries, NEC had been driving their developers since 1988 towards the production of a new video game system. Nintendo’s president Hiroshi Yamauchi saw NEC as a threat due to their successful semiconductor business, which would give them a “direct [and] inexpensive source” for chips. Backed by impressive resources, NEC had been able to saturate any and all industries it wanted, and when the PC-Engine was released in Japan in October of 1987, it appeared as though they would do the same for the video game industry.

After refinement of the PC-Engine it was released in America in 1989, with its name changed to TurboGrafx-16. As the first 16-bit system in a market ready for a new format, the TurboGrafx-16 initially sold quite well, selling more consoles in its first month than its competitors had during the same period.

Video game players are a capricious lot. Trends in popular genres change yearly, with nearly as much modishness as the fashion industry. A particular type of game or system that is popular today, can become an embarrassment to own tomorrow. Unfortunately for NEC, the TurboGrafx-16 was to become the poster-child for this phenomenon.

When the Sega Genesis was released, its dramatically more impressive graphics, sound and gameplay turned the TurboGrafx-16 passé overnight. The TurboGrafx became a stigma.

Ultimately, NEC was to blame for this. Having never produced entertainment software before, NEC designers had taken a casual approach to producing games. Many games had all the flash of a 16-bit title, but with little by way of depth of gameplay. NEC also depended on third-party developers to build a library of games. However, most developers were contractually obligated to Nintendo, and could not produce software for NEC. In addition to all of this, the TurboGrafx was not true 16-bit. While its graphics processor was 16-bit, its main CPU was merely 8-bit (a 6820, to be exact).

Despite the poor sales of the TurboGrafx, NEC continued to promote the system. A CD-ROM upgrade made it the first CD console, and a refined, scaled down version would be released as a portable system. Its CD capabilities would give one very well known CD producing company, Working Designs, their start. However, NEC would never achieve much success with their TurboGrafx CD. The reason, as Sheff put it, was that “NEC has arrived too soon with too little.”
The TurboGrafx would later be reincarnated as the equally ill-fated TurboDuo, once again in direct competition with Sega. During its life, however, less than 1 million TurboGrafx-16 units were sold.


Sega Genesis (Megadrive)



SYSTEM SPECS:
Processor: 680000
Processor Speed: 7.6 MHz
Resolution: 320 x 224
Colours: 64 / 512
Max Sprite Estimation: 90
Sprite Size: 32 x 32
Debut Price (1989) $189.99

When Sega first announced that a 16-bit system was on the horizon, Nintendo executives did not take them very seriously. To them, Sega was no threat. Sega had been demolished in the 8-bit era, and the only profits keeping them afloat were coming exclusively from their arcade base (only to be swallowed by the black hole of debt surrounding the Master System). Despite Nintendo’s nonchalance on the matter of 16-bit systems, other industry players were enthused. Trip Hawkins of Electronic Arts figured that Sega was creating a promising market, with a real future, “for which the price of admission was far less than Nintendo’s.”

Sega was beaten to the punch when NEC’s Turbographix-16 was released 6 months before the slated Genesis release. However, the Genesis would obliterate the Turbographix when it was released because of one key point: games.

NEC, who had a previous history of electronic entertainment such as CD players, VCRs, and computers, had never actually produced a video game. NEC executives did not know what to look for in a video game designer. Thus, the initial offering of Turbographix titles were very weak. Many game players marvelled in the store over displays of “Keith Courage” only to be greatly disappointed when they finally got the system home and found the shallowness of the game.

Realising their folly for not designing a 16-bit system, Nintendo attempted to save the Turbographix, in hopes of turning it into the next Nintendo home console. They allowed certain third party developers to produce Turbographix titles. But this was too little, too late because Sega debuted its technically superior Genesis shortly thereafter, and quickly seized control of the market.

The Genesis debuted with a smash hit Sega arcade game packed inside (Altered Beast.) Several companies, including Electronic Arts, would initially leave Nintendo to produce Genesis titles. They would be followed by many more as time went by and a 16-bit Nintendo system was merely a rumour.

When the 16-bit Nintendo was finally released in 1991, two years after the Sega Genesis, many predicted it to take control of the market. However, because of the SNES slow processing speed, Sega was able to remain a strong player in the industry. Capitalising on this, Sega produced a game based on speed. Sonic the Hedgehog, Sega’s new mascot, was born. Incorporated in the game play of this revolutionary title, were various environmental themes that had become so popular in the media of the time. This little blue character would cause Sega’s sales to soar, keeping the Genesis alive and well. Critics were charmed by the blue critter, but could not decide between him or Nintendo’s Mario. Most chose Mario as the better game.





During this era, Sega used their popularity to experiment with alternative mediums. They produced several popular portable LCD games based upon their popular arcade and home games. Sega ventured into educational software and even designed a system specifically for this purpose. A CD system was produced (despite a failed attempt by NEC to do the same) which became quite popular.

One of the few legal battles Sega was involved in during the Fifth Generation was one that can hardly be called a battle. During the 16-bit era, Sega executives decided that the best way to compete with a company that used key-chips in their hardware was to include key-chips of their own in the Genesis. While the first shipments of Genesis systems lacked this chip, later shipments did not. Accolade, still under contract with Nintendo, but desirous to produce Genesis titles, created a sub-division of their company (calling it Ballistic, to avoid any conflict with Nintendo) to produce Genesis titles. However, they had not become an official licensee with Sega. Ballistic, exploiting the fact that most Genesis systems out at that time lacked the key chip, ignored Sega’s requests that they cease production until a contract was signed. Because of this, a legal battle almost ensued. However, before it was taken to court, the two reconciled their differences and a contract that was beneficial to both parties was contrived. The contract dictated that for every one game Accolade produced on another system, they must produce five for the Genesis. While this seemed like a very good agreement at the time, later many would complain that this “created a situation where Accolade felt obligated to [produce] titles for the Genesis, whether they sucked or not.”



Some Genesis games were so great that nu-metal bands wrote songs about them.

Super Nintendo Entertainment System



SYSTEM SPECS:
Processor: 65816
Processor Speed: 3.58 MHz
Resolution: 512 x 418
Colours: 256 / 32,768
Max Sprite Estimation: 60 before slow-down, 128 max
Sprite Size: 64 x 64
Debut Price (1991) $199.99

During the Fourth Generation, Nintendo had dominated the industry with control of 85 to 90 percent of the market on both sides of the Pacific. They had ruled supreme. Smaller video game companies feared and respected them, none with the clout to usurp their autocracy. This made Nintendo executives feel their company was imperishable. Concerning this, Sheff wrote,
“Nintendo ... suffered from a malaise typical of industry leaders. Fat and happy, it had been lulled into a sense of invulnerability. Yamauchi and Arakawa felt they didn’t have to react to competitors simply because they were Nintendo.”

Thus, when Nintendo’s competitors began buzzing with rumours of 16-bit systems, Nintendo continued unabated in their production of 8-bit hardware. Nintendo did not believe that Sega with their 16-bit Genesis was a hazard to the NES preponderate market. While NEC was seen by Yamauchi as a potential threat, the lack of quality programmers for the TurboGraphix-16 was known to (and even somewhat orchestrated by) Nintendo. Thus, Nintendo did not feel a need to enter the 16-bit market.


Nintendo’s lack of aggression cost them dearly. While the TurbGraphix-16 did in fact fail, it was not beaten out by Nintendo’s fame, but by the tremendous popularity of the Sega Genesis. Sega’s dream machine went on further to knock the NES out of first place the following Christmas. Long-time Nintendo licensees began to leave to pursue contracts with Sega. Subsequent injury was evident in Total Research Corp.’s annual survey of brand equity that showed Nintendo dropped from its 27th place to 103rd, while Sega had leaped from 131st to 67th.

Irma Zandl, president of The Zandl Group, a New York-based firm that specialised in youth marketing, said in regard to this, “Sega has basically clobbered Nintendo. Sega has been much more aggressive in developing technologies [and its ads were much] more fun and really honed in on what [game players] liked.”

By mid 1991 sales of the Genesis were in excess of 1 million with cart sales ten times that, and while Nintendo of America had sold 31.7 million NES units in the United States alone, it had become evident to everyone (including Nintendo’s president Hiroshi Yamauchi) that Nintendo was quickly on their way out if something was not done.

Yamauchi had set Masayuki Uemura in charge of producing the 16-bit Nintendo, and after two years, the Super Nintendo Entertainment System (SNES) was released to the public. Continuing the belief that they were still unbeatable, despite this upstart company, Sega, Nintendo advertised the SNES, while confidently ignoring the danger of a Genesis retaliation. Twenty-five million dollars were spent on TV commercials. Gail Tilden at Nintendo Power (Nintendo of America’s system exclusive propaganda machine) “hyped the SNES shamelessly.”

Initially, Nintendo’s management were not the only ones confidant that the SNES would bring control of the industry back to Nintendo, many video game magazines chimed in, touting on the supremacy of the SNES. This was, however, short-lived.

Sega, preparing for the onslaught of its long-time rival, had discovered a flaw in the SNES hardware, the CPU speed, and had designed a game specifically to expose that flaw. Sonic the Hedgehog, Sega’s new mascot, was born. The game propelled the Genesis to even greater heights, but did not kill the SNES as Sega had hoped. Instead, the market became split two ways, with dual systems having fairly equal dominance of the industry.

No longer able to control its licensees like they had in the fourth generation, Nintendo was forced into new agreements with the third party producers. While some would still buy cartridges from Nintendo (as had been done with the NES) many would wind up manufacturing their own games (although purchasing SNES security chips was still mandatory) and produce titles for both systems. Attempting to still control this new breed of licensees, Nintendo now required that each company produce three SNES titles a year that achieved a rating of at least thirty points on Nintendo’s game rating system. This encouraged many companies to produce games that Nintendo executives “wanted” for their SNES.

In late 1991, Galoob Toys released the Game Genie, which infuriated Nintendo. The device allowed players to cheat in NES games and win more easily. Nintendo saw the Game Genie as a tool that reduced the long-term value of its games, and it attempted to prevent Game Genie sales. The Game Genie was the first “cheat card” accessory for a console. These have survived even to now, despite the console manufacturers disliking them, in the form of the Xplorer and others.



In spite of Nintendo being intensely competitive during the fifth generation, many mistakes on their part left their reputation tarnished. Rumours of a SNES CD system and other vapourware reduced much of the esteem for Nintendo that the consumer had during previous years.
Ultimately, during the last few years of the fifth generation, as the industry started booming about the forthcoming sixth generation and its 32-bit hardware, Nintendo attempted one last ditch effort to reign the 16-bit market. Designers and programmers worked overtime to push the SNES beyond the established limits. The war was not just with the hardware, however. In 1992, Street Fighter II kicked off the fighting game craze on the consoles, just as it had in the arcades. In 1993, Mortal Kombat hit home along with Street Fighter II Turbo. A year later, an uncensored version of Mortal Kombat was released onto the SNES, which helped propel Nintendo ahead in the battle against the Genesis.



An unprecedented deal was struck with Rare, a long-time contractor with the Pentagon that produced several big hit games. In 1994, Nintendo unveiled the Rare developed Donkey Kong Country, whose Advanced Computer Modelling wowed the crowds. The game went on to sell more than 9 million copies worldwide, cementing Nintendo’s lead in the battle and paving the way for two hit sequels. Games being released on the SNES were popular (Zelda, Mario, Metroid…) but none were as amazingly successful as those of the 8-bit era, and the SNES did not dominate the market as the NES had.


Today, many debate which system actually “won” the 16-bit wars. During the final two years, the SNES had sold more systems than the Genesis (barely), but there have been far more Genesis systems purchased since 1989. Some say that because the SNES came from behind (competing with a system that had been firmly established for two years) it deserves the honour. Others say that because the Genesis (with its older technology) was able to supply heated competition to the younger SNES it should be the winner. However, if all of these arguments are considered together, it becomes evident that neither system “beat” the other, and that this era benefited greatly from the multi-system market.

Having said this, it is widely considered by most gamers that the SNES was a better console with better games than the Genesis. It is home to games such as Final Fantasy VI, Street Fighter II Turbo, Chrono Trigger, The Legend of Zelda: A Link to the Past, Super Metroid, Super Mario World and many, many more games hugely popular even today.

But, then there’s always the what-if’s. What if Nintendo didn’t back out of their proposed agreement with Sony to create and market a hybrid SNES/SNES CD System xalled, ironically, “The Playstation”? The deal was virtually complete when Nintendo decided to quietly withdraw from the project on the very morning it was going to be revealed to the gaming world. This probably made Sony a tad angry, leading them to eventually construct their own console (the PlayStation we all know and love) which went on to beat the crap out of Nintendo’s next console, the N64. So, enough on that, what if Nintendo hadn’t backed out? The PlayStation we know now probably wouldn’t have existed, and half the games on it certainly wouldn’t. The N64 may not have been created, and if it was, it would have been a CD-based system. Square (the most critical third party due to their huge influence in Japan – and subject to much controversy after leaving Nintendo for Sony) may have stuck with Nintendo, for better or for worse. Hell, a 3D version of Final Fantasy VI was very much in the works, and I’ve seen screenshots to prove it! If this had happened, then chances are Nintendo would have continued their monopolistic reign in Japan, and Sony may have been working under the Imagesoft label still. And as for Sega? Well if Sony alone could beat the Saturn, then a Sega-Sony hybrid would flatten it like a paper cup. All in all, things have worked out well for everyone (except Sega). But who knows what would have happened if Nintendo hadn’t been so stubborn with keeping with the dated cartridge format for the N64? Perhaps Square would never have left them, and FFVII would have been so much different, and would the follow-ups even have existed in their current state?

Well, that’s all from me. It’s been fun revisiting a world where Micheal Jackson topped the charts, where ET made people cry, Tom Selleck was adored by everyone’s mother, console graphics were blocky, kids cried “Kowabunga!” and dressed up as turtles wearing bandannas, a certain yellow dysfunctional family were taking the world by storm and Sony made everything but game consoles. I won’t write an article on the next generation, as you know what happens. The rest, as they say, is history.