CTA Centennial Part 6b (1985-2000): Platform Wars – Video Games

This year marks the 100th anniversary of the founding of the CTA (Consumer Technology Association), which started out as the RMA (Radio Manufacturers Association). This is the fifth in a series of essays exploring and celebrating CTA’s and our industry’s first century of invention, innovation, and entrepreneurship, assembled from varying technology historical research and writings I have done over the course of 20-plus years, including from an annually updated industry history for CTA’s now-defunct Digital America, 20-plus years of CTA Hall of Fame inductee biographies, and numerous tech history articles for a variety of publications over the years.

Here are the previous chapters:

• • Part 1 (1924-1929): Founding
  • Herbert H. Frost: CTA’s “George Washington”
  • Part 2 (1930-1945): David Sarnoff
  • Part 3 (1946-1960): The TV Age
  • Part 4 (1961-1974): The Sixties
  • Jack Wayman, Our Industry’s Indispensable Exec
  • Part 5a (1975-1985): Decade of Disruption – Home Video
  • Part 5b (1975-1985): Decade of Disruption – Personal Audio
  • Part 5c (1975-1985): Decade of Disruption – Personal Computing
  • Part 5d (1975-1985): A Decade of Disruption – 1984 Phones It In
  • Part 5e (1975-1985): A Decade of Disruption – 1984, The Sony Decision
  • Part 6a (1985-2000): Platform Wars – Recording Media

Almost before the debris settled from the great 1984 video game bust, the industry started a slow recovery. This video game renaissance started with the introduction of the Nintendo Family Computer (or Famicom), better known as the Nintendo Entertainment System (NES).

Nintendo was a 100-year-old Japanese company founded as a playing card manufacturer. But by the early 1980s, now run by the founder’s more forward-looking grandson, Hiroshi Yamauchi, Nintendo was a leading coin-op arcade console maker.

While insanely influential in the video game space, Yamauchi was a private man, which likely accounts for his not being well-known to the public. He shunned his public role as the face of Nintendo, happy to keep the spotlight on his company’s products. He appeared in public infrequently, occasionally speaking at Nintendo’s trade shows and press briefings in Japan. But on those occasions, Nintendo’s core beliefs – which mirrored his own – were readily apparent.

As far as product was concerned, Yamauchi observed that “users want software – creative, innovative software that they have not experienced before – and in contrast, they purchase hardware ‘reluctantly’ in order to play the software they want.” Given the current shifting/spreading of gaming from console to mobile to PC, Yamauchi seems to have been proven correct.

At age 21, while still a student at Waseda University in Tokyo, Yamauchi was summoned by his grandfather to take over the reins at Nintendo in Kyoto. However, the younger Yamauchi’s vision for the company went beyond the confines of the playing card business, so he cleaned house and moved to list Nintendo on the Osaka Stock Exchange in 1962.

Yamauchi initially reached out into the future – literally – with a device called the Ultra Hand. The accordion-armed toy sold more than one million units and took Nintendo into the toy business. Several hits followed, including the company’s initial foray into home video gaming with Color TV Game 15 and 6 (1977), portable video gaming with Game & Watch (1980), and ultimately the first true home video game console of the modern age, the Family Computer System, which was called Famicom in Japan (July 1983).

But just as the time appeared right to expand globally, the overseas video game market collapsed. The West was wary of a new game console, but Yamauchi pushed forward, hopeful that the Famicom – renamed the Nintendo Entertainment System (NES) when released in the U.S. in 1986 – would persevere. The 8-bit NES, spurred by the popularity of the Super Mario Brothers game and its sequels, raised the stakes for all game system makers and immediately re-made the video game market and business.

In many ways, Yamauchi was a preview of the kind of forward-thinking, risk-taking technology executive later exemplified by the far more famous Steve Jobs. Under Yamauchi, Nintendo alternated between products that captured the public imagination and those that were little noticed – the cost of taking risks to produce products “not experienced before,” according to Yamauchi.

When discussing new products at executive meetings, Yamauchi was said to always ask, “Is this going to be a brand-new product that no one else has ever made?” If the answer was yes, he would support the idea even when others were against it. He was often asked how he was able to turn a playing card business into a global video game business, the self-effacing Yamauchi’s answer was always, “We were just fortunate.”

Yamauchi also had a knack for judging and leveraging talent. Gunpei Yokoi, the inventor of the Ultra Hand, rose from a position as a company maintenance man to create the Game & Watch and the influential Nintendo Game Boy portable together with his engineering partner, Satoru Okada. Similarly, Shigeru Miyamoto was originally hired to be a company artist, but his imagination sparked the creation of some of history’s greatest video games, including Super Mario Brothers, Donkey Kong, and The Legend of Zelda.

But Yamauchi’s most surprising move may have been to appoint Satoru Iwata as his successor. Iwata fully absorbed and amplified Nintendo’s iconoclastic approach with products including groundbreaking platforms such as the Nintendo DS and Wii.

Video Game Companies Try To “1UP” Each Other

Back to 1986, the introduction of the NES initiated a series of videogame “can-you-top-this” series of video game consoles and titles. Each game system manufacturer attempted to create systems and games with more spectacular graphics than the one preceding it, creating a cascade of competing innovations that resulted in geometric advancements in gameplay technology seemingly minute-by-minute. Like a championship basketball game, videogame leadership changed hands almost annually with every new system platform release.

For instance, the NES was followed by the Sega Master System (SMS) from a company called Sega. Originally an American coin-operated manufacturer that moved to Japan after World War II, the company merged with a jukebox firm in 1965 and was re-named Sega, a contraction of “service games.”

But Nintendo grabbed a dominant position thanks to its North American leadership of Howard Lincoln and, starting in May 1987, of marketing maven Peter Main. Nintendo established superior distribution, and, more critically, NES game developers were restricted from creating games for Sega, dooming Sega’s initial entry into the consumer hardware market. By 1987, thanks to Super Mario Brothers and two new games, the Legend of Zelda and Tetris, the NES became the most popular game system in the world by a wide margin.

Prospects for and competition in the video game business soon ratcheted up, however, with a new series of game devices. Nintendo capitalized on its firm grip on the market with the introduction of the first handheld game player, Game Boy, in 1989. Game Boy was followed the next year by other handhelds: Atari’s Lynx, NEC’s Turbo Express, and Sega’s Game Gear.

But also in 1989, another video game platform entry, NEC, started shipping the first so-called “fourth generation” 16-bit system in the U.S., the TurboGrafx-16. Sega followed a few months later with its own 16-bit system, a version of its popular arcade game, the Genesis, which featured more colors and more sophisticated games than previous 8-bit systems, and even the TurboGrafx-16.

Nintendo countered with its advanced 16-bit Super NES in 1990. But Sega, thanks to hit games such as Sonic the Hedgehog and some hip advertising, started grabbing significant market share from Nintendo. In 1992, Sega added a CD component. Within a year, Sega had captured a slim market share leadership from Nintendo, 32.1% to 30.1%.

A second bump soon seemed to once again trip up the videogame market. In 1993, the violence in such videogames as Mortal Kombat, Night Trip, and Doom brought unwanted government scrutiny. Congress, prompted by Second Lady Tipper Gore’s earlier Parents Music Resource Center (PMRC) campaign that forced the music industry to place warning labels on albums containing racy lyrics, attempted to force a similar rating system on the video game industry.

To forestall potential government-imposed ratings or regulations, the video game industry developed its own rating system in 1994, administered by the seemingly independent Entertainment Software Ratings Board (ESRB), formed by the Entertainment Software Group (ESG) industry group. Developers continued to release even more violent games, except now with warning ratings that often and predictably enhanced, rather than restricted, their popularity and sales.

Between 1993 and 1995 came fifth generation 32-bit video game systems, including the Sega Saturn the doomed Atari Jaguar, and the CD-based 3DO. Nintendo countered with its Super Game Boy, an adapter that allowed Nintendo’s 32-bit Super NES to play Game Boy cartridges, and the release of a new game, Donkey Kong. Nintendo and Sega spent the next few years jockeying for industry leadership. Nintendo, however, was large enough that, in 1992, chair Yamauchi bought the company’s North American hometown baseball team, the Seattle Mariners.

PlayStation

While a handful of newer consoles could play games on CD-ROM or CD-i, or, from 1985-1987 in Sega’s case, credit card-like Sega Cards, the vast majority of video games in the early 1990s came on suddenly, in an age inundated by optical discs, antiquated cartridges.

During this period, Sony was slowly replacing RCA as the industry’s most innovative and best-selling consumer tech hardware maker, largely thanks to the leadership of president (1982) and then CEO (1989) Norio Ohga. While Sony dominated most categories it entered, the company largely looked down at the still volatile boom-bust-boom video gaming business – until one day when company engineer Ken Kutaragi watched his daughter play with her Nintendo and believed there was an opportunity.

Kutaragi was born in August 1950 in Tokyo. A straight-A student, he worked after school in his family’s printing business. But the budding engineer loved to tinker, and he built gadgets such as go-carts and amplifiers. In 1975, Kutaragi turned his childhood hobby into a degree in electrical engineering from Denki Tsushin University in Tokyo and immediately joined Sony as a researcher in the company’s digital research labs.

One of Kutaragi’s first experiences with Sony’s reticence about his ideas was his work on developing an LCD projector that the company refused to approve. He also worked on Sony’s early Mavica digital cameras and soon gained a reputation as a problem solver and a forward thinker.

Because gaming was considered beneath Sony, Kutaragi worked in secret with Nintendo to develop a sound chip for the gaming company’s new 16-bit Super NES platform. In 1988, after receiving support from Sony president Ohga to finish development on the chip, the SPC700, Kutaragi fought for and received funding to develop a CD-ROM version of the Super NES for Nintendo.

Corporate sparring and technology legal challenges forced Sony and Nintendo apart in 1991, but Kutaragi once again convinced Ohga, this time to create a completely new Sony-branded CD-based game system. Legend has it that Ohga, after being reminded of the Nintendo slight, told Kutaragi “Go for it. Do it. This is a project that Sony needs to be in.” While others at Sony considered video game machines toys, Kutaragi insisted he was actually building a computer that would become known as the PlayStation.

According to one profile, Kutaragi’s management style was considered flamboyant, brash, and outspoken, and he was described by one co-worker as unusually animated and passionate, totally the opposite of Nintendo’s Yamauchi. Legend has it Kutaragi once offered to settle a PlayStation design argument by arm-wrestling.

PlayStation became available in December 1994 in Japan and in September 1995 in the U.S. What would become known as PlayStation 1 quickly became the best-selling video game system on the planet with more than 100 million units sold.

Nintendo tried to trump Sony and Sega and reclaim its street cred in September 1996 with its Nintendo 64 system. More than 350,000 N64s were sold in three days, and 1.7 million units in three months. Nintendo followed the N64 with the color portable Game Boy player in 1998 and a portable version of its popular playing card fad, Pokémon. Sega reacted with the first 128-bit console, the Dreamcast, in 1999, which also included the SegaNet online component.

But by then it was too late for cartridge-based console makers such as Nintendo, Sega, and Atari, which, in 1996, had closed its doors as a hardware maker after Time Warner sold it, and what remained of the company focused purely on game development. By the end of 1999, Sony’s superior size and market reach and its ability to wait out a devastating price war had given it more than half the video game hardware market. PlayStation outsold the N64 2-to-1 and the fading Dreamcast 10-to-1. Nearly two-thirds of all game software sold was for the PlayStation.

Sega left the videogame hardware business in March 2001 and, like Atari, became a game developer, ironically for Sony’s PlayStation. Two decades later, Sony PlayStation remains the dominant video game console platform.

Believe it or not, we’ve hardly scratched the surface of the myriad format wars that played themselves out during the last 15 years of the century. Next week, we’ll examine several airway platform battles, along with the beginnings of what would become the most public – and personal – platform war of them all.

See also: CTA Centennial Part 5c: A Decade of Disruption – Personal Computing