The Console Wars: A Brief History of the Video Game Industry

Peter Moore recently spoke about the benefits of competition between console developers. Around the same time, Shigeru Miyamoto said he felt Nintendo is a “genre of its own“, probably referring to not only the lighthearted spirit of a great majority of Nintendo games but also the Japanese giant’s deviation from the general market of video games. While both are correct in their respective statements, there is much more to pay attention to than just whether there is competition or not – history has taught us that much. While gaming technology progresses on a well-meditated track, there is a lot that could go wrong for any single one of the big developers, and it takes a lot of business savvy as well as a predictable market situation to keep things on that track. To get a better view of how balanced things actually are at the moment, let’s take a look back a few decades.

The “Crash”

For people roughly my age or younger, it may be a bit of a surprise that back in the early 80’s, there were many more video gaming platforms available than there are today. Living in Finland, I never even knew there was anything before or besides the Nintendo Entertainment System, until much later. While Atari is in retrospect the best-known console developer that existed at the time, the likes of Coleco and Mattel as well as a throng of others competed with Atari over the video game market. Even though the market circulated a lot less currency in the early 80’s, the number of competing developers and their respective consoles was so great that it couldn’t be sustained – and quite frankly, it couldn’t do that today. Three consoles of the same generation is plenty, any more would put at least one of the existing ones in jeopardy. But more on that further down.

It wasn’t just the bloated number of consoles that made things awkward – it was the games itself. Obviously, there were so many of those as well, with every developer cloning games made by others and swapping colors to make it into a new game (after all, with the technology back then, there was only so much one could do when it came to video games). Besides that, unlicensed games were pouring in, and even licensed games by legitimate game developers failed to meet the revenue expectations due to rushed schedules, poor marketing and general negligence towards video game quality standards.

Finally, as the console market was already twitching in the ground, it received one final kick in the belly from the developing home computer industry, with its generally superior hardware as well as more versatile applications. Video game consoles were considered a dead industry, and many companies involved in it crumbled – even Atari had to carefully maneuver in order to not be eliminated entirely, and it didn’t succeed without swallowing its pride.

It should be noted that this “video game crash” occurred in North America and had much less effect in Europe and in Japan. In fact, there were consoles available in Japan that didn’t even make it to North America due to its already oversaturated console market – such as the MSX, which is currently probably best known for being the original platform for Metal Gear.

The Revival

After the “crash” of 1983, home video gaming consoles were considered a thing of the past, and also had something of a bad reputation among distributors. For example, Atari had over-estimated the success of some of its games and flooded its distributors with huge numbers of those games, which obviously didn’t sell nearly as well, and thus the distributors were stuck with these games with no room to display them, and they couldn’t return them to the publisher since they had no games to replace them with and no money to refund them. Therefore, a lot of distributors refused to carry video games and especially consoles in their inventory.

In a cunning and fairly risky move, Nintendo branded its newly developed console an “entertainment system” in North America rather than a console, and accompanied it with a robot attachment to market it as an elaborate toy. By 1986, the Nintendo Entertainment System had been launched worldwide, and was turning the grim tide of video gaming around. The impact also allowed for Atari to struggle on, developing and releasing new hardware until mid-90’s, although being dominated by Nintendo at every turn. For example, Atari released their handheld console, the Atari Lynx, in 1989, only to lose in competition to Nintendo’s GameBoy, released earlier the same year.

To return the public’s faith in video gaming and to endorse their licensed games, Nintendo reduced the number of third-party games they would publish, equipped their consoles and games with authentication chips to prevent unlicensed games and piracy, and stamped their licensed game cartridges with a “seal of quality” – a lot of people, myself included, never paid much attention to the golden circle on every game cartridge, but as it turns out, it wasn’t there just for decoration. It was there to ensure people there wouldn’t be another game volume disaster like there was in the early 80’s, at least regarding Nintendo.

As a sign of the resusctitated video game industry, Sega launched their Genesis console 1988 onwards to compete with Nintendo. Although Nintendo commanded the vast majority of the market, Genesis still gained a decent foothold and showed more promise than the already suffering Atari.

The video game industry’s building momentum was made more apparent as fledgling Nintendo released their second console, the Super Nintendo Entertainment System, in 1990, which was visibly superior to other consoles at the time in terms of performance capabilities. It generally surpassed Sega Genesis in hardware and popularity, and further minimized Atari’s relevance in the competition.

Transition

Atari made one more attempt to get back into the game, and put together the Atari Jaguar, which was technically superior to other contemporary consoles and had great potential to turn the tables. It was originally launched in 1993, and internationally through 1994. While it had some weak points in terms of design as well as a humble selection of available games, the groundwork to get Atari back on its feet was there. The terminal element, however, was that it was launched at the most inopportune time: While the Jaguar could have defeated Super Nintendo and Sega Genesis as well as any other minor competitor at the time, only a year later the gaming industry leaped into the next generation, leaving the fledgling Jaguar inevitably outdated and inferior, sealing Atari’s fate.

From as far back as the mid-80’s, Nintendo had had the concept of disc-operated gaming devices that they wished to implement on their products. As technology in general progressed, such concept became possible to realize, and Nintendo sought to capitalize on it by contracting Sony to develop a disc-based add-on for the SNES. Through some relatively obscure contradiction in regards of the contract, Nintendo eventually broke off the agreement, leaving Sony with what they had developed so far and no application for it. Therefore, they decided to develop it further and launch the end result on their own: the Sony PlayStation.

The PlayStation was released in 1994-1995, the same time as Sega released their next console, the Saturn. Nintendo, returning to using game cartridges, released Nintendo 64 in 1996 to compete, although the release had been pushed back due to various factors, and Sony managed to gain a firm foothold in the market before the N64 ever launched. Aside from that, the potential of the new, superior console enticed various game developers, allowing PlayStation to carry a wide variety of different types of games right from the start. While their console sold threefold the number of Sega Saturn (and over 100 times the Atari Jaguar), Nintendo was, for the first time, defeated in the sales war – PlayStation was, in turn, three times as popular as N64. The Atari Jaguar, competing in this generation while being developed for the previous one, was deemed a failure and Atari was defeated for good in the mainstream console market.

This generation of consoles is, in a way, where the roots for widespread indie game developers is. While there have always been independent game developers, PlayStation, for example, encouraged consumers to participate and make their own games – they even released a special variation of the PlayStation for people wishing to debug games and develop some themselves. This was practically the opposite approach to that of Nintendo, who specifically sought to restrict third-party games in general.

The End of a War, the Beginning of Another

After the Saturn was defeated by Sony and Nintendo, Sega sought to improve their standing by developing a new console to surpass the existing ones, and the result was the Sega DreamCast. Unfortunately for Sega, the fate of the DreamCast was no different from that of the Atari Jaguar – while superior to the consoles available at the time, it was briefly overwhelmed by the wave of the next generation of consoles.

Sega launched DreamCast in 1998 and through 1999 worldwide. Shortly after, in 2000, Sony released their second console that would become the most popular console in the world, PlayStation 2. Nintendo renewed its participation in the wars with GameCube in 2002, in what can be seen as their last entry in the grand market of video game consoles. Aside from these, existing competitors, Microsoft had sought to create their own competitor for the then-upcoming PlayStation 2 back in the late 90’s, and through various delays, entered the market with Xbox in 2001 – still ahead of Nintendo, however.

PlayStation 2 dominated the market, and while Nintendo and Microsoft both achieved decent sales on their respective consoles, Sega fell short, and withdrew from the console wars. Instead, they went on to become solely a third-party game developer. With Sega’s defeat, the first “console wars” between Nintendo, Sega and Atari was effectively concluded, with Nintendo emerging as the victor – only to face another war that had already begun.

After competing with Sony and Microsoft with GameCube, Nintendo deviated from the market. Since the release of the Wii in 2006, Nintendo has relied more than ever on their old, tried titles, as well as casual games such as Wii Sports. Thus, they are now only marginally competing with the other two console developers, instead opting for a different audience for the most part. Therefore, the console wars has become a two-way, polarized race between Sony and Microsoft.

The Current Wars

Today, consoles are getting less and less a separate thing from a PC. The current generation of consoles allows for a wide array of applications, such as web browsing and data storage, that were once PC-specific features. Besides that, the upcoming Steam Machine by Valve appears to further narrow the gap, this time from the other side, bringing a PC setup closer to a home gaming console.

As history shows, even though the video game console market has gone through a whopping growth since the 80’s, there’s limited room for rival products. If a new home video game console from a new developer entered the fray, it is very likely that either it would experience an abrupt failure, or push aside one of the existing competitors. The most likely developer to drop is Nintendo, since – as established above – they are already mostly operating in a different market. This wouldn’t necessarily mean the “fall” of Nintendo, but rather that they would be forced to focus on a different audience and withdraw from the race with the other developers, probably resulting in future consoles by Nintendo having entirely different specifications than those still competing with each other.

However, since the market has grown so much in both volume and worth, new contenders are likely to find it increasingly difficult, risky and even intimidating to attempt entering it. Also, since the market is fairly saturated with both games and consoles and their accessories, each line with their own dedicated fanbase, the risk of failure is greater than before.

When it comes to the current giant competitors, Sony and Microsoft, the fact is that their core hardware is fairly similar to one another, and therefore innovation is required to keep them in the race, which is why both constantly develop new peripherals and other things to set them apart.

Another thing that has always been vital to a console’s success is the supply of games. The most visible part of the wars today is simply the comparison between games available for each console, and this is why third-party developers are key today. From each console developer, good political and financial sense is required in order to ensure the exclusive games and other things that give people a reason to pick their console instead of the other one.

It is worth noting that with today’s massive output of games developed by third-party companies as well as independent game developers, the market has some resemblance to that of the early 80’s, before the video game crash. The difference here is, that today there is not only a better quality control and sense for what the fans want, but also a far superior information availability. Should a terrible game somehow make it through development into being released, the fact that anyone can easily find out what the game is all about eliminates “trick sales”, of people buying a bad game in large numbers before word-of-mouth reaches others warning them not to buy it.

In conclusion, Peter Moore was right on the money as he spoke about the console wars being vital in order to keep the industry fresh and to force it to progress through competition. It is the same as with any other industry. What I find more intriguing, however, is whether or not Shigeru Miyamoto was speaking the prelude to Nintendo’s swan song in the competition, as he deliberately distanced Nintendo from the other two console developers. That, however, would open a window for a possible new contender – there needs to be more than one console to keep the industry alive, but not a whole lot more. The market could sustain three full-time lines of consoles, if the marketing, the timing of release, and the politics are done right.

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2 thoughts on “The Console Wars: A Brief History of the Video Game Industry

  1. Pingback: The Butterfly Effect: A World Without Nintendo | JJ Gee: A Gamer's Blog

  2. Pingback: Choose Your Own Adventure: Player-Influenced Narratives | JJ Gee: A Gamer's Blog

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