Image of the Nintendo Entertainment System, a video game system by Nintendo 1986

The Nintendo Entertainment System

Nintendo Entertainment System - Resetting the Game

(Page 1 of 4)
Nintendo 1985

It was said that only Nixon could go to China. It’s also true that only Yamauchi could go to America. Under iron-willed CEO Hiroshi Yamauchi auspices, Nintendo had released the company’s first cartridge-based home video game system, the Family Computer or Famicom, in mid-1983 to the Japanese market. Out of the gate, the unit was a resounding success, with half a million consoles sold after the first two months. Even with the early success of the Famicom as a foundation, Yamauchi’s next move astounds a lot of people. He calls his son-in-law Minoru Arakawa, head of Nintendo of America, and expresses his desire to sell the Famicom in the U.S. The effects of a big video game shake out are just beginning to be felt in the country, but Yamauchi believes that the North American market has untapped potential and that he has the system to prove it. His attitude is buoyed by steadily increasing sales of the Famicom in Japan.


A Skeptical Market

Arakawa and his team at NoA have already narrowly avoided disaster at trying to penetrate the U.S. market. They had floundered at selling arcade games coming down the pike from Nintendo in Japan, games such as Sheriff and Radarscope, until saved by the blockbuster release of Donkey Kong in North America in 1981. As they reach out to toy stores and department chains to gauge interest in a new home video game system, they seem to be courting disaster again. They are met with mounting skepticism in the industry; the market is becoming over-saturated with inferior product presented to a growingly indifferent public, and prices for these consoles and games are sinking fast. While Yamauchi believes the merits of the Famicom can overcome a skeptical market, there is a bigger problem. Donkey Kong might have been a big hit in the arcades, but Nintendo is still a virtually unknown name in North America in the consumer market. They have no presence in the retail chain. Thus Yamauchi declares that Nintendo must partner with a big name in video games to make headway in America. And the name in video games is still Atari.

A Deal With the Devil

Howard Lincoln, the Nintendo legal counsel who had so impressed Yamauchi in his defense of Donkey Kong against the King Kong copyright claims of Universal Studios, is by now NoA vice-president. He approaches Atari CEO Ray Kassar with a deal. Atari would manufacture and distribute the Famicom system worldwide, excepting Japan where Nintendo will still make and sell the console. Atari would market the system under its own label, with Nintendo getting a royalty for every system sold. The Japanese company would also retain manufacturing of the games. Nintendo even has a new name for the system, one that harkens back to Atari’s salad days: the Advanced Video System. It is the usual uncompromising hardball thrown by Yamauchi, with most of the advantages in Nintendo’s favour. Atari, however, with the 5200 Supersystem game console struggling and the 7800 Prosystem largely untested, feels inclined to accept the offer. Over a three day meeting in Kyoto, the royalties are agreed to, and verbally an agreement is made. All parties have full expectation that a permanent deal will be signed at the upcoming Summer 1983 CES in Chicago.

Ad for the ADAM Family Computer System, a home computer by Coleco 1983

Ad for the ADAM Family Computer System

Concerning ADAM

It is at this particular CES where Coleco unveils their new ADAM computer, available as either a series of add-ons for the existing ColecoVision game console, or a more expensive stand-alone computer. In order to demonstrate the increased storage capacity of the new system and its data tape drive system, Coleco elects to run Super Donkey Kong as a demonstration. This is a souped-up home version of Nintendo’s original arcade game and includes the original’s intro with Kong climbing the structure of girders, as well as the mud pie level that is missing in all other home versions of the game. As well-received as Donkey Kong was on the ColecoVision, the ADAM version of the game truly brings the arcade experience home in a near-perfect translation. The problem is that Nintendo had previously sold the home computer rights for Donkey Kong to Atari; Coleco only has the home console rights. Seeing the game on the ADAM has Kassar incensed, and he threatens to sink the whole Famicom deal with Nintendo, as well as sue the company for breach of contract. Yamauchi, in turn, rakes Coleco over the coals and demands they pull the game from the ADAM line-up. President Arnold Greenberg makes a go at arguing that, since the ADAM contains ColecoVision hardware, this makes it both a computer AND a video game. His contortions do little to sway Yamauchi.

Over the following weeks, a deal between the three companies over Donkey Kong rights is eventually hammered out, but the whole thing soon becomes academic. Coleco’s ADAM computer arrives on the market with a resounding thud, its various bugs resulting in a 60 percent return rate and a severely tarnished reputation for Coleco. Atari, meanwhile, implodes with the rest of the video game market, along with Ray Kassar and a few other execs at Atari who are embroiled in an insider trading scandal. It is eventually revealed that Atari didn’t even have the money to buy the Famicom rights anyway, and was perhaps merely stringing Nintendo along to hold off a competitor. When the dust settles, both Yamauchi and Arakawa realize Nintendo will have to go it alone in America.

Navigating the Fallout

Within a year of its release, the Famicom is proved a solid success in Japan, moving 2.5 million units. Perhaps even more importantly, 15 million game cartridges have also sold, vindicating Yamauchi’s prediction to retailers of the Famicom’s true value, that of a tool to sell software to the public. As for North America, there might not be enough adjectives to describe the sorry shape of the video game industry by 1985. Cratered. Defunct. Eradicated. Eviscerated. In its first decade, video games had enjoyed a meteoric rise in popularity, eventually surpassing the 100-year-old movie business in sales profits. Eventually caught in a morass of stagnant innovation and a rush of subpar games, the great video game crash of 1983-84 had reduced billions in sales to maybe 100 million by 1984. Giants of the industry, with Atari being the biggest of them all, were felled: either broken up and sold as pieces or unceremoniously shuttered.


Such is the smouldering, radioactive wasteland that Arakawa and his team walk, again under the direction of Yamauchi to prepare America to accept a new video game system by Nintendo. Toy stores, department stores, former game company executives… all bear witness that a company would have to be run by either idiots or maniacs to try and sell video games in such a climate.  Arakawa is not completely without evidence to the contrary, however. Video arcades, while certainly scaled back from their heyday, are still pulling in quarters. Having built their fortunes on the back of arcade hit Donkey Kong, NoA themselves release a rash of new arcade games through 1984, known as the VS. System. Featuring Famicom hardware and playing modified versions of Famicom games, the success of games like VS. Duck Hunt, and VS. Baseball suggests the viability of a new, highly improved video game console like Nintendo’s Famicom. Nintendo isn’t alone in this attitude; they have a lineup of manufacturers producing their Vs. system games, including Jaleco, Temco and Data East.

The Famicom, a home video game system by Nintendo 1983

The Family Computer

Remaking the Family Computer

Alone in the wilderness, Nintendo goes about redesigning the Famicom for North American release. Over several months in 1984, the brightly coloured, toyish Famicom casing gets a make-over by NoA employee Lance Barr while working in Japan with Nintendo Co., Ltd. engineers. It is Arakawa’s belief that the Advanced Video System must be distanced from the failed video game systems of the past. To achieve this, it is turned into a sleek grey box, more like a piece of stereo equipment you’d find at an electronics store than a video game. Nintendo also seems convinced that Coleco was somehow on the right track with the ADAM, and makes the AVS part of a modular computer system right out of the box, with a music synthesizer, computer keyboard, and cassette tape storage device all part of the package. The Famicom controllers also get a redesign, becoming elongated bricks that turn the D-pads of the original console into a metal square that reminds one of the Intellivision control discs. When not in use, these wireless controllers can slide into the front face of the game subsystem and disappear via two slots. Along for the ride are the Start and Select buttons of the Famicom, as well as the B and A action buttons. Rounding off the peripherals is a light gun called the Zapper, with a folding handle that turns it into a wand. For internal components, the AVS and later NES retain the chipsets of the Japanese Famicom.

What separates the AVS from computer/video game hybrids like the ADAM is the fact that all the various modules, or subsystems, are connected wirelessly through line-of-sight IR technology. There’s not a cord to be seen in the setup, aside from the power plug and connection to a TV.  This includes the new wireless controllers, with Nintendo hedging their bets on their acceptance by including a large, wireless flight joystick as well. To further help consumers with clutter, the computer keyboard, and cassette tape storage fit neatly on top of the keyboard for easy storage.  Accompanying the system are 25 cartridges translated from the Famicom library, including a “programmable” series of games like Excitebike that will allow users to create their own levels and save them via the cassette drive.

Crazy, or Just Stupid?

All this fancy new hardware gets its debut at the 1985 winter CES in Las Vegas, in a small booth manned by NoA president Minoru Arakawa himself. The general consensus among show goers is split pretty much 50/50 as to whether Nintendo is either crazy or just plain stupid for trying to peddle a new video game system. The AVS reminds too many buyers at the show of hopped-up video game consoles that had desperately tried to pivot into home computers as the bottom fell out of the market. The ColecoVision may have inspired lead designer Masayuki Uemura while planning the Famicom in 1983, but its ADAM computer conversion kit now haunts the AVS with dark comparisons of its keyboard and data storage unit. Atari, the word once synonymous with video game supremacy, is now invoked like a dirty word. Sitting in his little both taking this abuse, Arakawa must have been secretly thankful his company narrowly escaped being forever linked with such a failure.

Cartridge insertion instructions from the Nintendo NES video game manual

The NES manual provides instructions on how to insert a cartridge, er I mean Game Pak!

Another Redesign

And so it’s back to the drawing board for Nintendo, after the disastrous unveiling of the Advanced Video System. All of the computer peripherals are stripped out to both reduce the cost of the system, as well as to remove the bad taste from buyers’ mouths over video game/computer hybrids of the past. Only the game subsystem from the AVS is kept, also known as the Control Deck. The dimensions of the new case lovingly referred to as the “lunchbox” by the people at NoA, are enlarged to accommodate a new cartridge loading scheme. Instead of being inserted into a slot at the top of the Control Deck, bigger, flatter cartridges are slid into the front of the machine, into a 72-pin zero insertion force (ZIF) connector hidden by a plastic flap, and then pushed down to lock in place. This new loading system is intended to further disguise the game machine, fostering allusions of inserting a video tape into a VCR. It also creates technical troubles down the road, when this movement of the cartridges with every loading causes faults to develop in the ZIF connector. Cartridges are unable to handshake with the 10NES lockout chip installed in each NES (see below), and thus will not run. This leads to the popular meme of blowing on the NES cartridge connectors to get games to run. The controllers for the console revert back to a similar design of the Famicom’s, becoming wired but removable, with the trusty plastic d-pad making a triumphant return. In America, designer Lance Barr puts the finishing touches on the box, applying two-toned grey colouring and a black plastic band.

Robot in Disguise

Gunpei Yokoi and his R&D1 team at NCL come up with an item to even further distinguish the system, as well as capitalize on a current toy trend. 1985 is seeing the toy industry making an attempt at bringing cinematic robot buddies like R2-D2 and C3PO to life with robotic companions for kids. The talking, story-telling bear Teddy Ruxpin from Worlds of Wonder is probably the most popular example of this trend. Others of the era include Playskool’s Casey, a cassette player with a robotic body and LCD face, and the Omnibot by Tomy. We also have Atari co-founder Nolan Bushnell’s own attempts at introducing robots into the household from two start-ups: Androbot’s Topo, as well as the Petster robotic pets and the Compurobot I from Axlon.  Surfing this wave, Nintendo’s new wingman for its game machine is to be ROB, the acronym standing for Robotic Operating Buddy. It is a plastic robot on a platform that can raise, lower and twist itself, as well as open and close two hand grips in order to pick up objects. A camera in one of the robot’s eyes allows it to receive instructions via light patterns on a TV screen. A game called Gyromite accompanies ROB, with a series of gyroscopic weights that allow the robot to control the second gamepad and help play the game. Only one other game compatible with the device is ever released by Nintendo, titled Stack-Up.

Creating a long-lasting new game-playing device is not the point of ROB, of course. It is used as a trojan horse to get parents to accept another video game device into their homes, as well as distract retailers from their distrust of video games. When the entire remodelled system, now sporting the label Nintendo Entertainment System (NES), is re-introduced at the 1985 June CES in Chicago, ROB creates a more favourable attitude among retailers, but this newfound interest fails to convert into sales for Nintendo’s new game machine.

Deluxe Set packaging for the NES, a home video game console by Nintendo

The Deluxe Set

 The NES Put to the Test

After having two swings at bat, Arakawa is understandably demoralized at this point. His boss and father-in-law Hiroshi Yamauchi, however, still refuses to believe that the U.S. market is so completely tainted. He looks to the burgeoning sales of PC games as proof and also has the wind of a 90 percent lock on the Japanese video game market by the Famicom at his back. He demands that NoA finds a way into the market, so Arakawa determines that they will test market the NES in America leading up to Christmas 1985, and in a brash move NYC is chosen as the location. It is figured that, to paraphrase Sinatra, if it can make it there, it’ll make it anywhere. A 50 million dollar budget is allotted from NCL for the test phase, and a NoA base of operations is set up in a dilapidated warehouse in Hackensack, New Jersey. 100,000 NES Deluxe Sets, containing an NES game unit, the ROB robot, a redesigned Zapper light gun, and a copy of Gyromite and Duck Hunt, are shipped to New York HQ. The “Deluxe” labeling is removed from packaging, considering that during the test it will be the only set available to customers. A small group of 30 employees is sent to the East coast, referring to themselves as SWAT teams. Working the phones mercilessly, they harangue buyers for retail outlets to give the NES a chance. Nintendo tells stores that the company will set up, manage and tear-down in-store displays for the system. Arakawa also makes the extraordinary promise to retailers that any NES units remaining unsold will be bought back by Nintendo at full price, 90 days after delivery. Basically, the only thing stores would be sacrificing on the deal is shelf space. Combined with this promise, as well as persistence on the phone, NoA eventually lines up 500 stores for the test launch, including famous toy store FAO Schwarz in Manhattan.

Manual for the Nintendo NES video game system

Video game console? No, it’s a Control Deck!

Nintendo is very careful with the terminology used in the marketing of the NES, yet again as a strategy to inoculate against video gaming’s diseased past. The unit is not called a console, but a “Control Deck”.  The games do not come on cartridges, but “Game Paks”. Never is it to be described as a video game… it is an Entertainment System!  These, and all the other contortions Nintendo puts the NES through, are met with moderate success when released on October 18, 1985: 50,000 of the boxes are sold during the NYC test phase, at $159 a piece. Facilitated by the extensive game selection already in existence for the Famicom, a remarkably large library of 15 additional launch titles is also made available for the NES.

Launch box and games for NES, a home video game system by Nintendo

Launch NES box and games

Video arcade game system PlayChoice, by Nintendo

YOU HAVE NO CHOICE! PlayChoice. Ever notice how weird the word “choice” is?

It’s-a me, Mario!

The real key to the success of the NES might not necessarily lie in the “Video game? What video game?” smoke screen, but in a little Italian plumber, which would be the second time Mario leaped to the rescue of NoA. In February of 1986, test marketing moves to the L.A. market, and a second NES bundle is made available. It is labeled as the Control Deck set, and eschews the Zapper gun and ROB.  It also is the only configuration of the NES that comes packed with a little something called Super Mario Bros.. Having previously shipped for the Famicom in Japan on Sept. 13, 1985, the game becomes the ultimate system-seller for the NES. It takes the pipes, killer turtles and level jumping from the Nintendo arcade game Mario Bros. and extrapolates them onto a big, scrolling world full of secret pathways that captivates gamers. In its first four months of release, Super Mario Bros. also moves 2.5 million copies as a separately sold cartridge. Over 40 million copies of the game are eventually sold, ports and remakes notwithstanding. It also jumps into arcades in North America as VS. Super Mario Bros. in 1986. Released for the home on the Famicom in October of 1988, Super Mario Bros. 3 flies high in the arcades as one of the titles featured in Nintendo’s multi-game PlayChoice arcade machines in July of 1989. By the end of 1990 SMB3 has sold 2.6 million copies for the home in Japan alone.

JUMP: The making of Super Mario Bros.

Title screen for Super Mario Bros., a video game for the Famicom by Nintendo 1985

Welcome to the Mushroom Kingdom


Introducing the NES, 1985 ad

The NES Rolls Wide

After the L.A. test comes Chicago and San Francisco, with NES availability eventually spreading to 12 cities over the summer of 1986. By the time Nintendo is marketing the NES nationwide in the fall, between 350,000 to 400,000 sets have been sold. The initial package is rechristened the Deluxe Set, which still includes the Zapper, two controllers, ROB and his Gyromite game. Duck Hunt, wicked fun with the light gun, rounds out the package. Contents of the Control Deck box is then adjusted and renamed the Basic Set, listed for $99 with two controllers and Super Mario Bros.

Video Games Return

In selling the NES, Nintendo and retailers continue to tip-toe around the video game minefield. The artwork on NES game boxes deliberately shows actual in-game graphics, to avoid the over-promise of the elaborate game cover art of previous systems. Big chains take a cautious approach; Sears shoppers can only find the NES for sale in the retailer’s catalog as opposed to taking up space on their store shelves, the company still jittery from the catastrophic collapse of the video game market mere years ago. Not long after the Los Angeles launch, Nintendo also signs a deal with Fremont, CA-based Worlds of Wonder to distribute the NES to stores in 1986, hoping to capitalize on WoW’s extensive distribution chain, fuelled by the wild success of their talking bear toy Teddy Ruxpin, itself an inspiration for the ROB robot. The ex-Atari founders of WoW, along with the mostly ex-atari marketing department of the company, may have been spooked by the idea of pushing another video game system, but word comes down from above: get Nintendo on store shelves or get out. In a strange twist of fate, when WoW ends up filing for bankruptcy in 1987, Nintendo would end up hiring their field representatives, effectively gaining the Atari marketing muscle they had missed out with the previously failed agreement with the company. What would have to be most galling to Atari, Mattel handles NES distribution in Canada and Europe. In the fiscal year 1986, 1.8 million NES units are sold. Powered by hit games such as Miyamoto’s The Legend of Zelda series and his mentor Gunpei Yokoi’s Metroid games, by Christmas 1987 Nintendo’s console becomes the best-selling toy in America, and retains that title for the next several years. It beats out second place Pictionary by Western Publishing, Hasbro’s G.I. Joe and Mattel’s Barbie. The NES moves 3 million units for the year, contributing to an overall $700 million in sales for the industry. Having single-handedly rescued video games from oblivion, Nintendo now controls a 90 percent share of the market. They have made the video game industry the fastest-growing segment of the toy industry, again.

Another Wild Ride

And the NES rocket ship continues. By 1988 the market has more than doubled, to 1.7 billion. Demand remains strong: 8.4 million NES sets are ordered by retailers, but Nintendo can only manage to ship seven million. Other game makers have followed in the wake of this great success, with Nintendo owning 70 percent of the market in 1988, Atari (various legacy consoles, along with the Atari 7800 ProSystem) 16 percent and Sega (Master System) 14 percent. 97 percent of revenues for the company are coming from NES game sales. Considering that just a mere three years ago Minoru Arakawa was laughed off the show floor in a cramped 600 sq. ft. booth, the sprawling, glittering displays put up by Nintendo and Sega at the 1988 Winter CES in Las Vegas shocks showgoers. Atari and Commodore are relegated to proffering their wares in suites. “Nintendo City” takes up nearly half of the West Hall at the 1989 Winter CES, and for good reason: exhibiting a market penetration similar to that enjoyed by its cousin in Japan, one out of four U.S. households have an NES. As of March, America passes the Japanese as the biggest consumers of Nintendo consoles, passing the 13 million mark for installed units. 150 different games are available for the NES, racking up 75 million cartridges sales in America. In 1989, Miyamoto’s Super Mario Bros. 3 rakes in over $500 million in sales in the U.S., moving 11 million copies worldwide. At the next year’s Winter CES in Vegas, Nintendo continues to dominate floor space, housing 51 different licensees under its roof.

A License to Print Money

Nothing attracts lawsuits quite so much as rampant success and being a Japanese company with a Japanese name in the 80’s paints an even larger target on your back. So successful is the NES in America that it draws the ire of the U.S. Justice Department, spurred on by complaints from its competitors. Rep. Dennis Eckart, chairman of the House Small Business subcommittee, asks that the Justice Department begin investigations into a laundry list of various unfair market practices that seek to monopolize the home video game industry and keep prices artificially high. But is Nintendo merely attempting to retain the control and quality of their games, and prevent the kind of market over saturation that felled the entire industry a few years ago?

Flipping back to the time when the NES is being developed, President Yamauchi studies the video game crash of 1983-84 and realizes that a big problem was the flooding of the market with inferior product by numerous companies little concerned for quality. To avoid this, Nintendo instigates a strict (some might say, draconian) third-party licensee program, allowing only select developers make games for the NES. When you sign up for this program, you play by Nintendo’s rules. The company demands a 20 percent royalty on game sales, and although at first third-party companies are initially allowed to manufacture their own cartridges, Nintendo soon changes the rules. They demands that only they may produce the carts, at a manufacturing fee to the licensee of $14 per cartridge, which Nintendo farms out at a cost to them of $7 per cartridge. A minimum order for games is 50,000 units in the U.S., paid in advance. Licensees are limited to making only 5 NES games per year and have to hold off on releasing those games on competing systems like Sega’s Master System for two years.

Paying the Price

Companies agreeing to these conditions do get to put the Nintendo Seal of Quality on their packaging, but Yamauchi has another Ace up his sleeve to enforce compliance: every NES has a proprietary chip installed, that must successfully handshake with another chip inside the game cartridge in order for it to function. Called the 10NES, Lockout or CIC (Checking Integrated Circuit) chip, it is the ultimate gatekeeper to the riches of the vast and growing NES user base. Paying the price of admission, Namco, and Hudson become the first licensees for the NES. Game companies Capcom, Bandai, Konami, Taito, follow soon after. Nintendo might be playing hardball, but by the end of 1986 there are sixteen licensees, and 1987 sees 50 in the game. To get a sense of what is at stake, Konami’s earnings go from $10 million in 1987 to $300 million in 1991.

10NES chip, a component of the NES, a video game system by Nintendo

The dreaded 10NES lockout chip, mounted on an NES motherboard

Dissension in the Ranks

It’s not all sunshine and 1-up mushrooms in Nintendo licensee land, however. Namco is the first to complain about Yamauchi’s restrictive rules, and they start to align themselves closer to other console makers. The long-time head of Namco, Masaya Nakamura, complains to the press, telling the Japan Economic Journal that “Nintendo is monopolizing the market, which is not good for anyone.” It is over the lockout chip that former Namco partner Atari Games files a $100 million antitrust lawsuit against Nintendo in December of 1988, as well as a later call for an injunction seeking a halt of any future sales of Nintendo product. Their accusations include claims of patent infringement, tortious interference with business relations and trade libel. The company claims that Nintendo is illegally monopolizing 100 percent of the market for NES games. Atari Games (the coin-op version of Atari, not the consumer electronics side) set up a subsidiary called Tengen in 1987 as a NES licensee, but chafe at Nintendo’s control over their production rates and release schedules via the lockout chip, and seek to produce unlicensed Nintendo versions of their hit arcade games. In order to accomplish this feat, a technical team at Atari reverse engineers the NES in order to analyze its inner workings. First examining the communications between the console and cartridge, they move on to deconstructing the 10NES chip to pull out its object code. This they hope to decompile into source code but are unable to crack it. In a desperate ploy, a lawyer at Atari applies for a copy of the source code that Nintendo has filed at the U.S. Copyright Office, under the false pretence that the info is to be used in an intellectual property lawsuit. With this purloined data, Atari is able to produce their own version of the 10NES key, which they call Rabbit. Thusly, in 1989 Tengen becomes the first independent manufacturer of games for the NES, with Pac-Man, Gauntlet and RBI Baseball. You don’t have to be Perry Mason to figure out what comes next. Nintendo sues Atari, crying copyright infringement. A court eventually agrees with Atari that reverse engineering object code falls under the Fair Use legal doctrine, but Atari’s clandestine acquiring of the 10NES source code scuttles their anti-trust lawsuit.  Further, Atari Games launches their own antitrust suit against Nintendo in 1989, to the tune of $30,000,000.

Tengen, an home video game maker for the NES

All the great Atari arcade hits on the NES, and Nintendo can go pound sand! 1989

Other sources join the chorus, accusing Nintendo of using their leverage to strong-arm retailers. Company “Investigators” might show up at their places of business, and if it were found that a competitor’s products enjoy favourable shelf space, trucks with new NES cartridges might mysteriously fail to show up at loading docks. Favoured game developers would be extended more cartridge production capacity, while others might find themselves out in the cold during critical sales periods. As an example of the sorts of tactics Nintendo is accused of, in 1988 there are requests for 110 million NES cartridges by retailers. Analysts reckon that the market could support sales of 45 million of these games, but Nintendo only produces 33 million carts. Some feel the company is holding back to create scarcity and consumer hysteria over its products, but Nintendo insists the shortage is due to the dearth of semiconductor chips. These scenarios rattle retailers, already struggling to keep popular NES games in stock. It is suggested that Nintendo’s near monopoly causes game prices to be inflated for consumers by an estimated 20 to 30 percent. Senior Vice President of NoA Howard Lincoln accuses Eckart and the Justice Department of grandstanding and denies any wrongdoing by his company. However, due to pressure from the Department of Justice investigations and various lawsuits, in 1991 Nintendo drops the exclusivity clause from developer contracts, allowing third-party game companies to produce product for competing systems without the former two-year waiting period. The same year they also settle with American States Attorneys General over price fixing charges, where Nintendo and certain dealers were alleged to conspire to sell the NES at a higher price point. As ordered by Judge Robert W. Sweet, U.S. District Court of N.Y., the settlement offers compensation to customers who purchased an NES for $99.95 between June 1988 and December 1990. The company is to give out up to $25 million in $5 coupons to purchasers, which can be used towards the cost of a Nintendo cartridge. If less than $5 million worth of coupons is actually redeemed by customers, the company is to pay the difference up to $5 million to a settlement fund, to be used as the States determine. An additional $3 million will also be paid by Nintendo. As before, the company denies any guilt in the settlement, stating it is merely agreeing to avoid lengthy litigation.

Mattel's Power Glove, an accessory for the NES, a home video game console by Nintendo

Not exactly an iron fist

The NES satellite, for use with Nintendo's home video game console

The NES Satellite wireless multi-tap system, on display at CES, 1989

The Power of the NES

Investigations notwithstanding, by 1991 33 million U.S. homes have an NES. There are over 100 licensees and over 450 titles available for the console. By 1992, the industry is worth over $5 billion. Nintendo is netting over 1 billion dollars gross profit annually, and in an echo of Atari’s heyday, their net profit beats that of all American movie studios combined. Like the Atari VCS, the NES has paved the way for competing systems that try to carve their own market share from Nintendo’s pie. The Sega Master System is probably the most venerable of these challengers, released a year after the NES first lands on American shores. And we mustn’t forget old stalwart Atari, who makes a go of things by finally releasing their 7800 ProSystem console in 1987, with a low-balled price. Also, like the Atari VCS. the NES is showered with a plethora of peripherals, including the promising NES Satellite. This is a two-part solution to increasing the amount of gamers possible on the NES in couch play; one component is inserted into two of the front controller ports on the NES, styled to look perfectly at home. Another part acts as a wireless remote, with battery pack and four controller inputs. Thusly, up to four players can have at simultaneously in such touted 4-player games as a volleyball contest titled V’Ball, Play Action Football, and Super Off Road, a translation of the popular Leland arcade hit allowing four players…. among many other eventually compatible games. Perhaps the most notorious NES peripheral is the Power Glove, released in 1990 by Mattel. Intended to allow gesture-based control of games, it does little more than create a lot of frustration and strain a lot of players’ arms. The NES also spawns its own magazine. Starting as a newsletter servicing the Nintendo Fan Club headed by former NoA shipping manager Howard Phillips, it eventually morphs into long running magazine Nintendo Power in the summer of 1988. NP eventually reaches 1.5 million subscribers and sees its plug finally pulled in December of 2012.

Nintendo Online

There are also plans formulated to follow the Famicom’s lead and create an online service for NES users, titled the NES Network. Stock trading, home banking, and head to head online game play are to be offered in a bundle with a modem, keyboard and printer. Jerry Ruttenbur, previously senior vice-president at HBO, is named as president of network products for Nintendo in 1989.  Ruttenbur eventually finds that the project is being underfunded, and leaves the company in 1991. The NES Network fails to materialize.

Another online scheme that is floated on the NES is a system to allow state residents to play the Minnesota State Lottery via the console. A planned market test is to involve 10,000 homes, charging $10 a month to receive an NES and modem, with which users would connect to the central Lottery server and purchase lottery tickets. Heavily criticized by the Minnesota attorney general as a pathway to juvenile gambling, the planned test and service craps out in 1991.

The video game pop culture pattern continues with TV shows capitalizing on the NES’s success, all produced by DiC Animation. We get the syndicated Super Mario Brothers Super Show in 1989, starring wrestling sensation “Captain” Lou Albino as Mario, and Danny Wells as Luigi. Captain N: The Game Master appears in NBC’s 1989 Saturday Morning lineup, becoming the top-rated such cartoon show for six to eleven year-olds. The Adventures of Super Mario Bros. 3 surfaces on Sept. 8, 1990, on NBC, accompanying Captain N during its second season in an hour programming block. The eventually morphs in Captain N and the New Super Mario World in 1991.

Top loader version of the NES, a home video game console by Nintendo

NES-101 top loader, with “dog-bone” style controller

Goodnight, Sweet Prince

In a move similar to Atari and Mattel’s cheaper-but-the-same redesign of their flagship 2600 and Intellivision consoles, the NES is retooled in 1993 and called the NES-101 or NES Top Loader. The unit is priced at a low $49.99 but doesn’t extend the line for long. The last game for the NES, Wario Woods, is released in 1994. The next year, the Nintendo Entertainment System is officially discontinued. There have been 60 million NES units sold worldwide, and 500 million cartridges of 700 NES games. Shigeru Miyamoto makes eight Mario games for the NES between 1985 – 1991, selling nearly 70 million copies. Mario himself, according to Q rating scores, is more recognizable to kids than Mickey Mouse. Yamauchi’s gamble, initially seen as a sucker’s play in the context of the U.S. video game market at the time, has paid off amazingly. When people make a generic reference to a video game, they don’t call it an Atari anymore.

It’s now a Nintendo. logo_stop

Power Glove, an accessory for the Nintendo Entertainment System home video game console

A full 4-page ad for the dubious Power Glove. As Lucas Barton says, it’s so bad! 1990

Sources (Click to view; inert links are kept for historical purposes)

Page 1 – A Skeptical Market
Bringing the Famicom to America
Gilbert, Greg. Minoru Arakawa. 1992. Seattle Times, Seattle. B&W image of Minoru Arakawa

Page 1 – A Deal With the Devil
Nintendo Attempts Partnership with Atari to Sell Famicom
New York magazine, “Steve Ross On the Spot” by Tony Schwartz, pgs. 22-32, Jan 24 1983
Page 1 – Concerning ADAM
Preview of Coleco ADAM Computer Kiboshes Nintendo/Atari Deal
Phoenix, the Fall & Rise of Videogames, by Leonard Herman, pg. 98, 107, “Ray Kassar became enraged when he saw the display and threatened Nintendo with both a halt of the Famicom deal and litigation for breach of contract.” “In 1984, Nintendo had sold 2.5 million Famicoms in Japan and 15 million cartridges.” “Since a videogame console is only as good as its available software, Nintendo unveiled 25 cartridges at the CES.” Retrieved Oct 17 2015.
Page 1 – Navigating the Fallout
The Sorry State of the North American Video Game Market After Crash
Image of front and back of VS. System flyer from The Arcade Flyer Archive, “VS. System”, last updated Jul 9, 2002. Retrieved Oct 6 2015.
Phoenix, the Fall & Rise of Videogames, by Leonard Herman, pg. 98, 107, “In 1984, Nintendo had sold 2.5 million Famicoms in Japan and 15 million cartridges.” Retrieved Oct 17 2015.
Associate-manuel-dennis. “Nintendo and Data East Sign VS. License Pact.” Cash Box, 21 Feb. 1987, p. 46. Internet Archive, Data East USA, Inc., a leading manufacturer of coin-operated video games, has entered into a VS. license agreement with Nintendo of America, Inc.; Nintendo’s other VS. System licensees are: Jelco, Temco, Sun Electronics and Konami.
Page 2 – Remaking the Family Computer
Famicom Redesigned into Advanced Video System
Historical text for the AVS display at Nintendo World, NYC Feb 8 2006. “The system included a keyboard, handheld joystick, light wand/gun, music keyboard, and a data storage unit, that were all infrared wireless. The revolutionary controllers were also wireless, and could be stored in the front of the main unit, or control deck when not in use.” Retrieved Oct 17 2015.
Image of AVS from Wikimedia Commons, “Nintendo Advanced Video System (retouched).jpg”, retrieved Oct 14, 2015
Phoenix, the Fall & Rise of Videogames, by Leonard Herman, pg. 98, 107, “Since a videogame console is only as good as its available software, Nintendo unveiled 25 cartridges at the CES.” Retrieved Oct 17 2015.
Page 2 – AVS Debut at CES
Nintendo Previews AVS at CES
Images of AVS 1985 brochure with wired controllers and ROB from I___E___T’s Bucket, Photobucket. Retrieved Oct 17 2015.

Page 2 – Another Redesign
AVS Redesign into Final NES Form Factor
Pg. 4, “Lance Barr and I (fellow NoA designer Don James) took the time to take it back into our design studio and created that light grey, dark grey and black band for the final version of the product”. Retrieved Oct 17, 2015.
Page 2 – Robot in Disguise
ROB Toy Robot NES Peripheral
Image of NES test launch box and games, as well as other information from, “In Their Words: Remembering the Launch of the Nintendo Entertainment System” by Frank Cifaldi. Pg. 7, “Nintendo’s first wave of games carried a distinct visual style, with pixelated in-game graphics blown up against a black, starry sky. This (Nintendo’s game box art), like every aspect of Nintendo’s campaign, was to differentiate its products from those that came before. ‘There was an over-promise in the games that had been introduced prior,” said (Gail) Tilden”
Kent, Steven. “Retroview: Ressurection (Part 2).” Next Generation, Oct. 1998, pp. 144–145. Arakawa chose to work out of a small (600 square feet), quiet booth at Summer CES. Shortly after launching their system in Los Angeles, Nintendo set up a very strategic partnership to help with future markets. Their new partner was Worlds of Wonder. Several ex-Atari executives founded Worlds of Wonder, and not surprisingly, its marketing executives were mostly from Atari too. Nintendo hired many of World of Wonder’s field representatives, giving the Japanese company complete control of the marketing arm.
Image of the NES Deluxe Set contents from Unbox Therapy’s “Nintendo NES Deluxe Set Unboxing (1985)” video. Retrieved from YouTube, Oct 16 2015
Page 3 – The NES Put to the Test
NES Test Marketed in NYC
Images of the NYC mall demo, ROB playing Gyromite and Stack-Up and their respective game boxes, and of Howard Phillips in bow-tie, from Howard Phillips’s Gamester Howard Facebook page, Timeline Photos. and ROB and his games albums. Retrieved Oct 17 2015.
Page 3 – It’s-a Me, Mario!
Super Mario Bros. Released
“A Question of Character.” Next Generation, Oct. 1998, p. 80. In 1989 Super Mario Bros. 3 sold more than 11 million cartridges worldwide and grossed more than $500 million in the U.S. alone.
“The Video Game Update.” Computer Entertainer, Jan. 1990, p. 11.
(The game has sold 2.6 million copies to date in Japan.)

Page 3 – The NES Rolls Wide
Wide Release of the NES
50,000 number for units sold during NYC text phase from European Stars and Stripes (NY Times News Service), by Andrew Pollack, pg. 13, Nov 15 1986.Further Los Angeles, Chicago and SF NES roll-out schedule from European Stars and Stripes article, as well as – Wide release of NES in fall of 1986 from same article. Unknown date retrieval.
Page 3 – Video Games Return
NES Rescues the Video Game Market
Info on Sears relegating initial NES sales to only their catalog from Hutchinson News (NY Times News Service), “Video Games: Gobbling Up Part of the Christmas Market”, pg. 9, Oct 16 1986. Retrieved Oct 16 2015>
New York Magazine, “The Bottom Line: Video-Game Comeback” by John Crudele, pg. 20, Jan 25 1988. “In 1987, NES beats out Pictionary (#2), Hasbro’s G.I. Joe (#3) and Mattel’s barbie (#4) for hottest toy of the Christmas season, according to Toy & Hobby magazine”. Retrieved Oct 15 2015
Page 4 – Another Wild Ride
Continued NES Success
Compute, “Editor’s Notes” by Keith Ferrell and Selby Bateman, pg. 4, Mar 1988. “The resurgence of video games at the 1988 Winter CES is Las Vegas is the show’s biggest surprise, with Nintendo and Sega manning huge displays. Meanwhile, Atari and Commodore are absent from the show floor, opting for suites instead.” Retrieved Oct 4 2015
Brown, Mark R. “Show Report Winter CES.” Info Mar.-Apr. 1989: 65-67. Internet Archive. Web. 27 June 2017. “Nintendo City” occupied almost half the building.
Info on Nintendo having a NES in 1 out of 4 households in the U.S. in 1989, as well as selling 90 percent of the consoles sold in the year from “Brookings Papers on Economic Activity, pg. 64
“1990 Winter CES Overview.” Computer Entertainer, Jan. 1990, pp. 1–7.
Nintendo took the biggest chunk of real estate (51 licensees take up a lot of space)

Page 4 -Paying the Price
The NES Lockout Chip
“Nintendo and Japan: The Story So Far.” N64 Magazine, June 1997, p. 90. Namco and Hudson were the first to sign up. These privileged developers were initially allowed to produce the cartridges themselves, but it wasn’t long before Nintendo removed that right.
Strategic Management: An Integrated Approach, by Charles Hill and Gareth Jones, published by Nelson Education. Pg. C166, “Despite these restrictions, 6 companies (Bandai, Capcom, Konami, Namco, Taito and Hudson) agreed to become Nintendo licensees.” “…Konami’s earnings went from $10 million in 1987 to $300 million in 1991” Pg. C168, “As of 1991, there were over 100 licensees for Nintendo, and over 450 titles were available for NES.” “In 1988, retailers requested 110 million cartridges from Nintendo. Market surveys suggested that perhaps 45 million could have been sold, but Nintendo allowed on 33 million to be shipped. Nintendo claimed that the shortage of games was, in part, due to a work wide shortage of semiconductor chips.” “In 1990, under pressure from Congress, the Department of Justice, and several lawsuits, Nintendo rescinded its exclusivity requirements, free up developers to write games for other platforms.” Retrieved Oct 18 2015.
Image of the 10NES lockout chip, and other information from Retro Nintendo Reviews, “10NES Lockout Chip Basics”. “Nintendo devised the 10NES (or Checking Integrated Circuit/CIC) lockout system…”. Retrieved Oct 17 2015.
Page 4 – Dissention in the Ranks
Pushback Against Nintendo Monopoly
Info on Department of Justice investigation into Nintendo’s business practices from Elyria Chronicle Telegram (AP), “Eckart asks Justice antitrust probe of Nintendo”, pg. E-3, Dec 8 1989. Retrieved Oct 17, 2015.
Info on Atari’s $250 million anti-trust lawsuit, America becoming the largest consumer of Nintendo consoles with 13 million sold, and Nintendo selling 75 NES carts in 1989 from Daily Herald (AP), “Nintendo’s trump card is computer fun, games, section 3, pgs. 5-6, May 29 1989. Retrieved Oct 17 2015.>/span>
Quartermann. “Gaming Gossip.” Comp. ASleepyTelevision. Electronic Gaming Monthly May-June 1989: 22. Internet Archive. 3 Feb. 2019. Web. 21 Oct. 2019. <>. Atari Games Corp….filed a $30,000,000 anti-trust suit that, among other things, claims that Nintendo has unfairly monopolized the NES market.
Associate-manuel-dennis, comp. “Atari/Tengen Expand Lawsuit Against Nintendo.” Cash Box 11 Mar. 1989: 59+. Print. …Atari Games’ anti-trust lawsuit against Nintendo of America and its Japanese Parent [etc, ect]
Nintendo Settlement Fund Legal Notice, By Order of Judge Robert W. Sweet, U.S. Dist. Ct., S.D.N.Y. Printed in GamePro Magazine, September 19911989 images of kids at F.A.O. Schwartz’s Nintendo Corner from The Stars of Famicom Games, Game Software Production and Distribution, pg. 32-33, PHP Institute 1989. Scanned by Chris Covell.
“Pronews Report: Nintendo Drops Exclusivity Clause.” Gamepro Apr. 1991: 76. Internet Archive. 9 Aug. 2016. Web. 9 Aug. 2016. Nintendo of America has dropped the exclusivity clause from its licensing agreement with third party developers…
“Pronews Report: Nintendo Settles Price Fixing Charges.” Gamepro July 1991: 76. Internet Archive. 13 Aug. 2016. Web. 13 Aug. 2016. Nintendo of America says it will hand out up to $25 million in coupons to customers and will pay $5 million in order to settle price fixing charges brought against it by the Federal Trade Commission.

Page 4 – The Power of the NES
NES Peripherals
White, David. “Nintendo Player: Nintendo Expands Horizons.” Comp. ASleepyTelevision. Electronic Gaming Monthly Sept. 1989: 50. Internet Archive. 3 Feb. 2019. Web. 22 Oct. 2019. <>. Image of NES Satellite.
Nerdist: The Indoor Kids: Gamester Howard! –

Kondorito. “Nintendo NES 3D Boxes Pack.” EmuMovies, 20 Feb. 2019, Game box images for Cool World, Pirates!, Alien 3 and Mad Max
Page 4 – Nintendo Online
NES Online Services
“ProNews Report.” Editorial. GamePro Jan. 1992: 160. Internet Archive. Web. 17 Aug. 2016. The Minnesota State Lottery announced that it will stop plans for a limited market test that would have allowed lottery players to purchase tickets from their homes using a Nintendo Entertainment System and modem.
Page 4 – Goodnight, Sweet Prince
The End of the NES
Image of NES-101 top loader by Evan-Amos, posted to Wikimedia Commons on Feb 28, 2011. Retrieved Oct 17, 2015.
Unannotated, Uncategorized or I Just Don’t Damn Remember!
New York magazine, “The War On Wall Street’s Inside Dopesters” by Jack Egan, pgs. 41-44, Mar 28 1983

Pages - 1 2 3 4

Comments >>

  1. avatarAguyinaRPG

    Very nice article! Just a few comments.

    “All this fancy new hardware gets its debut at the 1985 winter CES in Las Vegas”, it was in January of 1984 that the AVS first premiered. It went through four CES’ before solidifying and finally finding interest.

    “releasing their 7800 ProSystem console in 1987” January of ’86.

    “Power Glove, released in 1990 by Mattel.” Another date one. Holiday season of 1990.

    There’s also two things which I think are often a bit oversimplified in explaining the NES. First is the 10-NES chip, which initially wasn’t there to lock out third parties at first. The actual standards for licensing deals only began in January of 1986, as explained in the Iwata Asks on the Famicom. There’s a lot missing in our knowledge about the construction of the NES such as why they went for extra pin connectors (Gyromite containing the converter might indicate that it wasn’t always an intentional decision) and I think we’re too quick to jump on Nintendo really having a plan regarding the “seal of quality” . Nobody has really asked why it was initiated in the first place, only what it meant when it was already 1987.

    Secondly is the time frame about the success of the NES here. 1987 was the breakthrough year and the one of true recovery for the industry. They went from 1 million to 4 million game machines, which was the biggest percentage boost over its whole life span. I believe they cut ties with Worlds of Wonder that year too, so it really goes to show just how gargantuan Nintendo had become with their only real competition anywhere being NEC with the PC Engine (until the Genesis’ “second launch”).

    Very engaging overview though. I love the way that you guys write and present things. Looking forward to more!


Leave a Reply

Your email address will not be published. Required fields are marked *