In the early 1980s, after years of being on top of the world, Atari made the fatal mistake of investing millions of dollars into an E.T. video game, based on the wildly successful film of the same name, only to see it flop. It is regarded as the biggest flop in video game history. Landfills were filled with millions of unsold E.T games due to many publications labeling it as the ‘worst video game of all time.’
Then came the crash.
The video game crash of 1983, also known as 'Atari shock' in Japan, was a massive recession of the video game industry that occurred from 1983 to 1985. Revenues that had peaked at around $3.2 billion in 1983, fell to around $100 million by 1985. The crash was a serious event that brought an abrupt end to what is considered the second generation of console video gaming in North America.
The crash almost destroyed the then-fledgling industry and led to the bankruptcy of several companies producing home computers and video game consoles in the region, including the fastest-growing U.S. company in history at that point, Atari. It lasted about two years, and many business analysts of the time expressed doubts about the long-term viability of video game consoles.
There were several reasons for the crash, but the main cause, according to Electronic Games Magazine was the saturation of the market with hundreds of mostly low-quality games which resulted in the loss of consumer confidence. The full effects of the industry crash would not be felt until 1985.
Stores stopped promoting video games and Time Magazine as well as other publications said that ‘video games’ were a fad destined to the go the way of the ‘pet rock.'
But then Nintendo came along and proved all the critics wrong.
According to Steven Kent, author of 'The Ultimate History of Video Games,' sometime after the crash, Nintendo approached Atari about using their name to promote a revolutionary and advanced 8-bit system. Nintendo didn't believe their own name carried any weight in America. So Atari initially agreed. Until they saw a competing system known as Coleco Vision showcasing Donkey Kong at an electronics convention. Enraged at the thought that Nintendo gave them the rights to Donkey Kong behind their back, the deal went nowhere.
Nintendo had to go it alone.
And they did. The Nintendo Entertainment System made its debut in the United States in 1985.
They knew that stores had no confidence in video games and were not ready to start putting them up in their computer section.
Using a brilliant marketing scheme, Nintendo included a robot known as ROB with the Nintendo Entertainment System and stores began selling the system in the toy section, rather than the computer section and it took off.
Before long, over 30 million consoles were sold, eventually topping out 61 million consoles.
Nintendo was king in America, Sega was number two and Atari went down to number 3.
Fast forward to 2005.
Nintendo had a virtual monopoly on the hand held gaming industry with the Game Boy Advance and DS and kids everywhere loved Pokemon but they became a distant number 3 in the home console wars. The Nintendo Cube was in third place compared to Sony’s PlayStation 2 and the XBOX.
Nintendo had to do something revolutionary if they didn't want to end up just making video games for other systems which was the ultimate fate of Sega and Atari.
Nintendo boss Shigeru Miyamoto, the man responsible for legendary games like Donkey Kong, The Legend of Zelda, Super Mario Bros. and more, felt that video game controllers, with all their buttons were just way too complicated. He wanted something that anybody could just pick up and play with.
The Nintendo Wii came out in 2006 as a system that lets you control the action on screen with your hands and body as opposed to only a controller.
And it was a monstrous success.
Before long, the competing systems, PlayStation 3 and Xbox 360 were just relegated to 2nd and 3rd place against the new juggernaut Nintendo created.
Their stock went from $19 a share all the way to more than $120 a share.
Nintendo was king once again.
Then in 2012, Nintendo felt it was time to move to the next level and introduce the Wii U.
But it wasn't a huge success.
The Wii U debuted in November of 2012 and was off to a strong start with over 400,000 units sold that month. However, sales started to dwindle in January as the Wii U sold only 57,000 units in the US.
By comparison, the original Wii sold 435,000 in January 2007, two months after launch.
Some suggest that Nintendo may have made the ‘Dreamcast’ error.
That error is when a console maker decides it is time to advance to the next level, way before their competition does. It is this mistake than sank Sega’s Dreamcast in early 2000s, which has been dubbed one of the most underrated systems of all time because of its high quality games but lack of promotion from retailers.
Gamers just weren't ready yet to buy a new system after investing their money in games for the Nintendo 64 and PlayStation and that is what lead to the downfall of Sega's Dreamcast and ended their nearly two decades stint in manufacturing consoles. Today, they make video games instead of consoles.
Some industry figures have claimed that the Wii U is not in fact an 8th generation console, with many citing the hardware as the reason and thus the problem when promoting the system against the technically superior XBox One and Playstation 4.
Reggie Fils-Aime, COO of Nintendo of America, however, has noted that similar comments were made in 2006 when the Wii first launched and that the Wii ended up taking a majority share in the console market anyway.
There is no telling what Nintendo will do now that Sony’s PlayStation 4 and Microsoft Xbox One are hammering away at their share of the market.
Even their most recent handheld system the Nintendo 3DS, followed by the 2DS failed to live up to expectations and their stock took a beating.
Still, Nintendo maintained its 9 million Wii U sales forecast for the fiscal year through 2014. Wii U software showed improvement in the Q2 period, reaching 5.27 million units, a 400 percent jump on the previous quarter. Nintendo has credited the software growth to key first-party releases such as Pikmin 3 and The Legend of Zelda: The Wind Waker HD with more classic titles still to come.
If history proves anything, Nintendo doesn’t give up easily and with tons of titles like Zelda, Super Mario, Pokemon, Metroid and millions of loyal fans, it doesn't look like Nintendo is ready to go the way of Sega and Atari just yet.
Long time Nintendo fan and e-commerce expert Joshua Rabinovitch, says dependence on classic titles just isn’t enough. “Nintendo has to get ‘virtual’ and get over the fear of Virtual reality” he said.
“When Virtual Boy collapsed in the 1990s, it took the wind out of them for that type of technology, but with this new push for virtual reality by Oculus and Sony, they have to do something revolutionary like come out with a virtual system. Unlike the 1990s, technology is finally ready and the public is clamoring for it.”