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Aerith Gainsborough gazes upon the Highwind in Final Fantasy VII for PlayStation.

Aerith Gainsborough gazes upon the Highwind in Final Fantasy VII for PlayStation.

Author’s Note

I wrote this research paper for my English 101 final (I received a 91, which I was happy with considering I lost a few points on APA formatting errors that OpenOffice caused). Gamers will notice there’s a lot missing, but the idea was to fit it within the project’s limitations and requirements while maintaining quality of content.


Video games have come a long way in a relatively short period of time. To this day, the term “video game” does not have a concrete definition, therefore ascertaining what the first video was is impossible. A popular misconception is that Pong, released in 1972, was the first video game. This is definitely incorrect, as even its creators (Nolan Bushnell and Ted Dabney) developed a game called Computer Space in 1971 (which isn’t the first video game, either). While Pong may not have been the first video game, it was certainly the first commercially successful one and ushered the video game industry into existence.

This is a brief report on the journey of the video game industry from the early 1970s until the end of the 1990s. A strong focus will be centered around subjects such as how and why the video game crash of 1983 occurred, the importance of Nintendo in the video game industry, the rise of the PlayStation brand and Sega’s struggle to compete.

The Video Game Crash of 1983

The legend itself!

The legend itself!

Released in 1972, Pong was the first commercially successful video game. Following its success, Atari’s Atari 2600 became the console by which all others were to be measured. Unfortunately, Atari indulged in many practices that would lead to automatic shunning in today’s gaming climate. This led to what is referred to as the video game crash of 1983.

There were many factors that played in to the collapse of the video game industry in the early 1980s, but perhaps the most important aspect to note is that the industry was new. Navigating one’s way through uncharted territory is no easy task, and Atari’s missteps laid the groundwork for console manufacturers of the future. While Atari almost entirely killed off the American console gaming industry (revenues peaked at $3.2 billion dollars in 1983 and were down to a mere $100 million in 1985, a decline of nearly 97%), they were also the fastest growing company in the history of the United States. Atari had captured lightning in a bottle, but they had no idea what to do with it.

At the height of their popularity and financial success, Atari invested in one of America’s favorite arcade games: Pac-Man. Originally released in Japan by video game publisher Namco back on May 22, 1980, an American publisher, Midway, licensed it for release in North America a few months later in October. The title was ported to the Atari 2600 in 1982 at the pinnacle of Pac-Man Fever and Atari was so confident in its sales potential that 12 million copies were ordered, of which only 7 million were sold at $37.95 a pop. While 7 million units sold of anything is a respectable figure, 5 million unsold units is embarrassing.

Everyone knows about E.T. the Extra-Terrestrial the movie and at one time in 1982, everyone knew about E.T. The Extra-Terrestrial the video game. The rights were secured to make the game in July 1982, giving the game only 5 weeks of development time to be ready for the 1982 Christmas season. Unfortunately, it takes a lot longer than that to craft a fine video game, even with the limited technical capabilities of early consoles. E.T. the Extra-Terrestrial became one of the worst commercial flops in the history of video games and stands a testament to poor game design and unfair publisher demands on game developers.

In September 1983, the Alamogordo Daily News of Alamogordo, New Mexico, reported several semi-trailer loads carrying unsold E.T. the Extra-Terrestrial cartridges, Atari consoles and boxes were destroyed and buried at a local landfill. The New York Times verified the report shortly afterward. Once widely regarded as a myth (even by the game’s developers), Ottawa-based entertainment company Fuel Industries was given access to the landfill for six months in order to film a documentary and excavate the area in search of what Atari supposedly left under the desert 30 years prior. As of this writing (December 2013), their findings have not been made public. It just goes to show not only how passionate video game fans can be, but how critical E.T.’s failure was to the fall of Atari.

Nintendo Takes the Reins

Look familiar?

Look familiar?

In 1949, Hiroshi Yamauchi’s grandfather suffered a stroke, forcing Hiroshi to take over as the president of his grandfather’s company, Nintendo. Founded on September 23, 1889, Nintendo began as a maker of playing cards, staying that way until 1963 when Hiroshi renamed the company from Nintendo Playing Card Company to Nintendo. After several failed ventures (which included a cab service and “love hotels”), Nintendo began experimenting with toys and electronics.

In 1977, Nintendo hired a student named Shigeru Miyamoto. He would go on to create the best-selling video game franchise of all, Mario, as well as Donkey Kong (in which Mario first appeared in 1981), The Legend of Zelda, Star Fox, F-Zero, Pikmin, the Wii series and numerous others. Miyamoto helped save the American video game industry with titles like Super Mario Bros. (which would be packed in with Duck Hunt in 1988) and The Legend of Zelda.

Duck Hunt was based on of the Laser Clay Shooting System technology, developed by Hiroshi Yamauchi and Gunpei Yokoi in 1973. Yokoi would go on to create the Game & Watch, Game Boy, and the D-pad featured on the Nintendo Entertainment System (NES) and every console controller since its inception. Perhaps the most popular game cartridge of all the time, the Super Mario Bros. and Duck Hunt 2-in-1 package helped solidify Mario as a household name in the United States and around the world.

In 1985, the Nintendo Entertainment System was released in North America. The console had seen highly successful in its native market of Japan since 1983. By 1987, Nintendo alone was raking in $1.5 billion dollars in revenue, a drastic turnaround compared to the dismal lows of 1985. By 1987, there was no question that Nintendo had not only saved the video game industry, but had transformed it into a venerable powerhouse of creativity, innovation and profits.

How Nintendo Created Their Greatest Competition

Essentially a SNES with a CD-ROM drive. This was the original PlayStation prototype.

Essentially a SNES with a CD-ROM drive. This was the original PlayStation prototype.

Sony, another Japanese consumer electronics company, entered into an agreement with Nintendo in 1988 to produce a CD-ROM based add-on to Nintendo’s upcoming new console, the Super Nintendo (SNES). Well over 18 months from release, Sony began to work on what was then known as the Super Disc. However, the fine print stated that Sony would be the “sole worldwide licenser,” meaning the business relationship would be far more beneficial to Sony than for Nintendo.

At the 1991 Consumer Electronics Show (CES), Nintendo would inadvertently create their biggest competition. Sony announced the Play Station (with a space) that would have a port to play Super Nintendo cartridges as well as Sony’s Super Discs. With the release of the Philips CD-i (originally a joint venture between Sony and Philips), Nintendo saw an opportunity to hang Sony out to dry and took it.

The Super Nintendo’s main audio chip was designed by Sony engineer Ken Kutaragi (who would soon become known as The Father of PlayStation). As such, Nintendo was already heavily involved with Sony. But Nintendo was willing to take an incredible risk.

The day after Sony announced the Play Station, it was Nintendo’s turn to take the stage. They were expected to talk more about the Super Disc and what it meant for the SNES. Instead, Nintendo announced that they would be working with Philips. Though both Nintendo and Sony would later agree that it was best not to become too upset with each other given how important the SNES audio chip deal was, Sony was palpably irate.

Ken Kutaragi saw an opportunity of his own. He sought the support of Sony CEO Norio Ohga in developing Sony’s own video game console. Sony executives gave Kutaragi the green light and the world was introduced to the CD-ROM based PlayStation in Japan in the December of 1994, and in North America and other territories in September, 1995.

The Rise of PlayStation

The "You Are Not Ready" marketing campaign.

The “You Are Not Ready” marketing campaign.

The Sony PlayStation ushered in the era of 3D gaming. Though the Super FX chip was put to use in a couple of Super Nintendo games (Star Fox and Vortex), the Super Nintendo was limited by its hardware to produce anything more sophisticated. The PlayStation was more powerful and powered by CD-ROMs that could house far greater amounts of data than cartridges.

Nintendo’s successor to the Super Nintendo and direct competitor to the PlayStation was the Nintendo 64 (N64), released in 1996. While the N64 was technically superior to PlayStation, it was severely limited by its use of cartridges. PlayStation was able to utilize Full Motion Video cutscenes and CD-quality audio on top of allowing for a streamlined game development environment.

While Nintendo has been and likely always will be arguably the best first party developer, its lack of third-party support has been a trend it has been unable to shake for the better part of two decades. Squaresoft, one of the most prolific third-party developers of the 1990s, developed Final Fantasy VII, Final Fantasy VIII and Final Fantasy IX exclusively for the PlayStation because their vision could not be executed on Nintendo’s cartridge-based Nintendo 64. Meanwhile, Nintendo was perfectly capable of crafting genre-defining titles such as Super Mario 64 and The Legend of Zelda: Ocarina of Time for the N64.

Sony is credited with cementing CDs as the go-to console gaming medium and changing the public’s perception of who gamers are. Accessibility became one of the PlayStation brand’s greatest strengths, on both the developer and consumer fronts. Sony gathered insurmountable momentum that solidified its position in the video game industry.

The original PlayStation would go on to sell over 104 million units by the time it was discontinued in 2006. The PlayStation 2 launched worldwide on March 4, 2000, and would go on to be the best-selling video game console of all time, selling over 154 million units before it was discontinued on January 4, 2013. The PlayStation 3 was released in November 2006 and has since sold over 80 million units. The PlayStation 4 launched on November 15, 2013, becoming the fastest selling console of all times, with 1 million units sold in well under 24 hours.

The Nintendo 64 would sell only 33 million units before its discontinuation in 2003. The Nintendo GameCube, released in November 2001, would sell only 21 million units before being discontinued six short years later in 2007. The Wii marked Nintendo’s return to explosive console sales with over 100 million units sold and counting. However, Nintendo’s newest home console, the Wii U, has been on the shelves since November 2012 and has only sold 4 million units, though some of the highest rated games of the last year have been exclusive to Nintendo. The third party support that PlayStation began to rally with their original PlayStation is stronger than ever with the PlayStation 4. Nintendo’s third party support is nearly nonexistent, leading to a wider variety of games on the PlayStation 4, allowing games to be more accessible to a wider audience, just as they had done with the original PlayStation.

The Saga of Sega

The iconic Sonic the Hedgehog

The iconic Sonic the Hedgehog.

Another console manufacturer was on the scene from the late 1980s up until the late 1990s. Sega was responsible for the Sega Master System, Sega Genesis, Sega Saturn and Sega Dreamcast. Unfortunately, Sega was never quite able to match the commercial success of their competitors and was forced out of console manufacturing in the late 1990s.

The Sega Master System competed with the Nintendo Entertainment System and sold anywhere between 10 and 14.8 million units. The Sega Genesis was Sega’s most successful piece of hardware, selling nearly 30 million units but still well short of Nintendo’s SNES sales of The Sega Saturn went up against the PlayStation and Nintendo 64, selling nearly 9 million units before the console was abandoned by Sega in a desperate bid to beat their competition to the punch on the next generation of consoles.

The Sega Dreamcast was a revolutionary game console. For the first time, a home console was able to connect directly to the internet via an attached 56k modem. Online console gaming had been born on the most powerful and relatively affordable console on the market.

However, Sega would inevitably be crushed by the PlayStation 2. Sony’s platform had more developers, more games and was simply the most refined game console the world had ever seen. Sega, ever the underdog, had put up a good fight, leaving gamers with classics like Crazy Taxi, Shenmue, and the iconic Sonic the Hedgehog. Sega lives on as a third-party developer.


Traveling through time in Chrono Trigger on SNES.

Traveling through time in Chrono Trigger on SNES.

In conclusion, the video game industry evolved from a niche market into a multi-billion dollar a year industry in a short period of time. There was incredible triumph, epic failure, corporate betrayal and revenge served cold. But more than anything, there was undying passion for an industry that most mistakenly believe began as two rectangles knocking a square back and forth. This passion persists in all gamers and continues to spread throughout the world.