The Birth of Nintendo

By David Law (@myretrogamehub) 

Reading Time: 10 minutes 

13th July 2024 

After the 1983 video game crash, the industry seemed doomed, with many predicting the end of video games. Enter Nintendo, a small Japanese company that came out of nowhere to resurrect the gaming world. This blog explores how Nintendo turned things around, becoming a significant player in the market and a staple in every household with its consoles. Discover how Nintendo's innovation and creativity brought the industry back to life and established it as one of the biggest names in gaming.

The Aftermath of the Atari Shock 

The 1983 video game crash, also known as the "Atari Shock," was a pivotal moment in gaming history, leading to significant repercussions for the industry and consumers.

The immediate effect of companies like Atari suffered massive financial losses. The company's revenue fell from $2 billion in 1982 to just $100 million by 1984. Many smaller companies went bankrupt due to the collapsing market.

The market was flooded with poor-quality games, resulting in unsold games and consoles, financial strain for retailers, and a loss of consumer trust in the industry. Many game development companies went out of business, and numerous talented developers left the industry, leading to a decline in the number of new games produced. Retailers also reduced the shelf space allocated to video gaming products, making it harder for companies that survived the crash to sell their products.

One of the major impacts was consumers' perception of video games. Due to the proliferation of low-quality titles, people became wary of video games. The excitement and trust built up during the industry's early years quickly eroded. Many parents viewed video games as a passing fad and were reluctant to purchase new consoles or games for their children. Interest shifted towards movies and personal computing, leaving video games struggling to recover.

During this downturn, personal computers like the Commodore 64 and Apple II became popular, offering new gaming opportunities and attracting developers and players alike. This transition helped sustain the gaming spirit in a different format.

To make things worse, the media heavily covered the crash, often focusing on the industry's failures. Notable stories, such as the burial of the millions of unsold Atari E.T. cartridges, became symbols of the industry's downfall and further fuelled public scepticism and disinterest in video games.

The Dawn of the 8-bit era: Video Game Revival 

It's undeniable that the video game industry has evolved remarkably since its inception. It progressed from early arcade games like Computer Space and Pong in the 1970s to home consoles like the Atari 2600, which featured iconic titles such as Pac-Man, Asteroids, and Space Invaders.

Although the American game industry may have crashed in 1983, the international market continued to thrive. On the other side of the world at the time was a company named Nintendo, the arcade giant responsible for creating games such as Donkey Kong and Popeye. On July 15 1983, the company released a new home gaming console to the Japanese market, the Famicom (for Family Computer).

The Early Days of Nintendo

Nintendo was founded on September 23, 1889, by Fusajiro Yamauchi in Kyoto, Japan. Initially named Nintendo Koppai, the company produced handmade Hanafuda playing cards.

In 1929, Fusajiro Yamauchi retired. Leadership passed to Sekiryo Kaneda, who took the Yamauchi name. He expanded the card offerings and modernized production.

In 1949, Sekiryo Yamauchi suffered a stroke, prompting his grandson, Hiroshi Yamauchi, to take over as president at 22. Hiroshi's leadership would prove transformative for Nintendo, steering the company through significant change and innovation.

In the 1960s, Nintendo found moderate success in the toy industry, mainly due to Gunpei Yokoi, an engineer who invented popular toys, including the best-selling Ultra Hand, an extendable arm.

In May 1983, Nintendo launched a third-generation home video game console called the Famicom (Family Computer) in Japan. Within just two months, the console sold over 500,000 units nationwide.

The Nintendo Famicom

Released in Japan on July 15, 1983, the Famicom made a significant impact as an 8-bit console, offering groundbreaking gaming experiences with simplistic yet charming graphics and sound.

The term "8-bit" can be misleading when referring to older systems like the Atari 2600.
While the Atari 2600's CPU is 8-bit, its overall graphics, sound, and memory capabilities are limited compared to later 8-bit systems like the Famicom due to hardware design and technology differences.

In simple terms, "8-bit" refers to how a computer or gaming console processes and handles information. This basically means the system's processor can handle 8 bits of data simultaneously. Games usually have simpler graphics and sound than modern games, with a more pixelated and blocky appearance.

The Famicom, with the same processor as the Atari 2600, has a better graphics display chip and slightly more RAM, allowing it to address more pixels. Nintendo's engineers improved the system by adding more memory and a second processor dedicated to graphics, enabling the Famicom to deliver more colours and detailed graphics than any previous system.

The controller was a crucial innovation. It introduced the now-standard D-pad instead of the joystick and featured a simple two-button design. Most players found the Famicom controller easier to use and more comfortable to hold.

With the success of its Famicom in Japan, Nintendo aimed to enter the home console market in the United States. Yamauchi, the company's president then, was exploring the idea of bringing the Famicom to North America. Nintendo entered into discussions with Atari to have Atari distribute the Famicom in the U.S. under the Atari brand. This would allow Nintendo to take advantage of Atari's established distribution channels and brand recognition.

During the negotiations, a legal dispute arose involving Coleco, another major player in the video game industry, which had obtained the rights to produce a version of Donkey Kong for its home console, the ColecoVision.

At the 1983 Consumer Electronics Show (CES), Coleco demonstrated the Adam computer, which included a version of Donkey Kong. This created tension because Atari believed it had the exclusive rights to distribute the game on home computers due to its negotiations with Nintendo.

Atari had only purchased the floppy disc license, while the Adam version of Donkey Kong was cartridge-based.

The Donkey Kong licensing dispute created tension between Atari and Coleco, leading to uncertainty about a potential partnership between Atari and Nintendo. Ultimately, the deal fell apart, with Atari backing out of distributing the Famicom in North America. This was a major setback for Nintendo's U.S. home console market entry.

The Nintendo Entertainment System

The Famicom continued to do well throughout Japan in 1984. Nintendo sold over three million Famicom units in the eighteen months since launch. Yamauchi decided to make another attempt at entering the U.S. market in 1985.
This time, Yamauchi decided to operate through Nintendo's American offices and to enter the U.S. market directly without seeking a partnership. They rebranded the Famicom as the Nintendo Entertainment System (NES). They made several modifications to appeal to Western consumers, including redesigning the console and packaging it with the R.O.B. (Robotic Operating Buddy) to position it as an entertainment system rather than just a video game console.

Minoru Arakawa, Yamauchi's son-in-law and president of Nintendo of America, along with Howard Lincoln, its chairman, decided to officially unveil the Famicom at the January 1985 Consumer Electronics Show (CES) in Las Vegas.

They initially named the Famicom Advanced Video System (AVS). They rented a small booth in a corner at the Convention Center with a set up of a Famicom with an AVS label, a computer keyboard, a music keyboard and twenty-five games. They ended up with no orders at the convention in Las Vegas. 

Arakawa and Lincoln believed that for the Famicom to succeed in the U.S. market, it needed to be positioned as more than just a video game system. Therefore, their strategy was altered for the Summer C.E.S. in June of the same year. They introduced a light pistol and a robot named ROB (Robot Operating Buddy) as part of the solution. ROB was designed to work with two games, Gyromite and Stack-Up. It could interpret what was on the screen and follow instructions to complete various tasks as directed by the games. Although the robot offered limited play value, it was intended to serve as a decoy to demonstrate that the Famicom was not solely a gaming system. Instead of being called the Advance Video System, it was dubbed the Nintendo Entertainment System.

No orders were received again at the June C.E.S. A marketing firm was hired to test the market to assess the NES using focus groups and watching sessions behind a one-way mirror of random boys playing with the NES. The response was disappointing.
After the focus test, Arakawa called his father-in-law and suggested giving up, believing the U.S. video game market was dead.
Yamauchi refused to believe it. The Famicom was flying off shelves in Japan, and he was confident the NES would do the same. He then proposed testing the system in America's most challenging market, New York City.

Arakawa and Lincoln believed that for the Famicom to succeed in the U.S. market, it needed to be positioned as more than just a video game system. Therefore, their strategy was altered for the Summer C.E.S. in June of the same year. They introduced a light pistol and a robot named ROB (Robot Operating Buddy) as part of the solution. ROB was designed to work with two games, Gyromite and Stack-Up. It could interpret what was on the screen and follow instructions to complete various tasks as directed by the games. Although the robot offered limited play value, it was intended to serve as a decoy to demonstrate that the Famicom was not solely a gaming system. Instead of being called the Advance Video System, it was dubbed the Nintendo Entertainment System.

No orders were received again at the June C.E.S. A marketing firm was hired to test the market to assess the NES using focus groups and watching sessions behind a one-way mirror of random boys playing with the NES. The response was disappointing.
After the focus test, Arakawa called his father-in-law and suggested giving up, believing the U.S. video game market was dead.
Yamauchi refused to believe it. The Famicom was flying off shelves in Japan, and he was confident the NES would do the same. He then proposed testing the system in America's most challenging market, New York City.

Hitting the Big Apple

In early 1985, a shipment of NES arrived at the New Jersey warehouse leased by Minoru Arakawa, along with thirty employees. They worked to persuade retailers to accept the NES by referring to it as an 'entertainment system' instead of a 'video game.'

Before Super Mario Bros. was released, the NES's main attractions were the Zapper guns, the two available games, Duck Hunt and Hogan's Alley, and R.O.B. Arakawa's risk-free money-back guarantee convinced 500 retailers to carry and sell the NES that Christmas. Despite going against Nintendo president Hiroshi Yamauchi's wishes, Arakawa allowed his sales team to offer buyback any unsold units or accept returns.

The team worked long hours, demonstrating the system during the day and setting up store displays at night. After months of hard work, the NES could be found in hundreds of stores throughout New York. Nintendo managed to sell 50000 units that Christmas, about half of the inventory shipped from Japan, proving Yamauchi's point that video games were not dead in the U.S.

The Evolution of Jumpman

Nintendo released Donkey Kong in the arcades in 1981, and it became a major success, redefining the company and leaving an indelible mark on the video game industry. The game introduced an ape named Donkey Kong and a character named Jumpman, who had to jump over barrels thrown by Donkey Kong and climb ladders to rescue Pauline, whom the ape had kidnapped.

Shigeru Miyamoto created Donkey Kong and later designed the sequel, Donkey Kong Junior, in 1982. Jumpman was renamed Mario, and the roles were reversed. Mario is the villain, while Donkey Kong Junior has to rescue his father, whom Mario has kidnapped.

In 1983, Miyamoto introduced Mario's brother, Luigi, making them both plumbers in Mario Bros., a classic arcade game developed by Nintendo.
In Mario Bros., players can control Mario and/or Luigi in a single-player or two-player mode to defeat creatures by flipping them over and kicking them off the stage. The game's single-screen levels require platform navigation and cooperative play. Mario Bros. introduced critical elements to the series and influenced future platforming games.

In 1985, the U.S. video game industry was still recovering from the 1983 crash. An oversaturation of poor-quality games and consoles in the market caused a notable decrease in consumer trust and interest in video games. Nintendo aimed to restore consumer confidence with the NES.

Miyamoto sought to create a more expansive and immersive experience for players. The result was a game that would set new standards for design and gameplay.

Super Mario Bros. was released on the Famicom in September 1985,
and the NES version for North America was released around late 1985 to early 1986.
Instead of single-screen gameplay, it was a fast-action platformer featuring side-scrolling action. Mario could run through a seemingly endless, colourful world filled with hidden secrets, tunnels, walking turtles, and mushrooms that granted power-ups. The game has eight worlds to explore, and the ultimate mission is to rescue the princess from Bowser, the final villain.

The game was released as a bundle with the Famicom in Japan, and it was so successful that Nintendo's C.E.O., Yamauchi, decided to do the same for the North American market with the NES.

The success of Super Mario Bros. had a profound influence on game design. It demonstrated the importance of cohesive level design, tight controls, and engaging gameplay mechanics. Many of the principles established by Super Mario Bros. continue to inform game development.

Super Mario Bros. remains a beloved classic, re-released on various platforms from the Game Boy Advance to the Nintendo Switch. The original release has sold over 40 million copies to this day. 

Jumpman has significantly evolved over the years into the Mario we know today.

Other popular games, such as The Legend of Zelda and Metroid, alongside the iconic Super Mario series, solidified the NES's reputation as a revolutionary console in gaming history.

Preventing third-party developers

To avoid what happened to Atari, Nintendo implemented strategies to prevent knock-offs by third-party developers and maintain control over game quality for the NES.

• Nintendo implemented a lockout chip, the 10NES chip, to prevent unauthorized games from being played on the system. This ensured that only licensed Nintendo games could be played on the NES.
• Strict licensing agreements limited all third-party developers to releasing no more than five games per year on the system, ensuring that only high-quality games were produced.
• Nintendo introduced the "Nintendo Seal of Quality" label to all licensed games and accessories to assure consumers that the product was officially licensed and met Nintendo's quality standards.
• Third-party developers were required to sign contracts preventing them from creating games for other consoles, ensuring that only high-quality games were available on the NES.
• Nintendo took legal action against companies that produced and sold unlicensed games and accessories.

These measures effectively stopped low-quality, unauthorised games and upheld the NES's reputation for high-quality gaming. This helped Nintendo build a loyal customer base and set a new industry standard for quality.

Video games began integrating into popular culture, appearing in movies, T.V. shows, and music, marking their transition into mainstream entertainment in the mid to late 1980s. 

Two years after Nintendo's launch, a new rival appeared, and a war between the two titans fuelled an intense rivalry that captivated gamers worldwide.

Read about The Birth of Sega.

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David - My Retro Game Hub

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