In 1983, Hiroshi Yamauchi, President of Nintendo, began designing a new video game system called the Famicom, which aimed at being cheaper while having better graphics and games than the competitors. One of Yamauchi’s initial moves that proved to be a smart strategy was an implementation of a security chip in the cartridge. This allowed for only Nintendo-approved games to be played on the Famicom. Atari’s failure can mainly be attributed to the mass of games being developed by numerous third parties that diluted their game library. Nintendo knew that in order to avoid this, they would have to be more particular with who made their games, and how often these games would be released.
A strong initial strategy placed Nintendo products in New York City stores without much liability to the store owner. This got the product out there, and was welcomed with a favorable consumer reaction. Arakawa did a national release the next year.
Nintendo continued to grow in the US due to their business model. They signed developers to two-year deals to prevent them from breaking off to develop for other systems. Nintendo also had strict rules to force developers to create a few amazing games, rather than many mediocre games. This strategy has proven to be a smart model and has been effective over the life of Nintendo. In addition to this, Nintendo expanded their brand image by creating a consumer magazine called Nintendo Power, and by using product placement in movies. This in addition to having Mario and other mascots, got people associating the idea of video games with the name, Nintendo. During their 8-bit era, Nintendo was able to secure a majority of the video game market due to their cheap prices, high quality games, branding and timing of entering the market when there were few other competitors.
In 1987, technology for a 16-bit gaming system was introduced, making way for competitors to challenge Nintendo’s 8-bit NES in the video game market. The first company to come out with a 16-bit console was NEC. NEC was a electronics company based in Japan that focused on computers and communications. In 1989, NEC introduced a system called the TurboGraphx-16 to the U.S. market. The system cost $200, and it had higher quality graphics and sound and was also more responsive than 8-bit systems. NEC believed that with their superior device, they could compete with Nintendo. However, there was a problem. Because NEC was predominantly a hardware manufacturer, games were left to be developed by independent companies. Software engineers quickly found that the NEC system provided minimal advantage over 8-bit systems. Games were “uninspired,” and NEC was left to take the blame for the low quality games. By the end of 1990, only 500,000 NEC systems had been sold. The lack of knowledge about software engineering and videogames in general led to the downfall of NEC.
Sega was founded in 1951 in an attempt to introduce arcade games to U.S. military bases in Japan. By 1965, they introduced their first game, Periscope. The game had success in the United States and Europe, and...