We realised that investors are not familiar with the notion of video gaming. We had decided to put together a short history of video gaming to basically “educate”. This is primarily written by our intern Darroy with some minor editing.
Although it may seem that we are pointing towards an investment in Nintendo, it is not the case here. We are happy users of the Switch but have yet been able to press the purchase button for Nintendo shares.
History of video games
Video games are visual games that are computer generated, requiring inputs via buttons be it on a console or a remote controller. They have been around for over forty years with the first video game being an arcade game.
Arcades are a relic for many of the gamers of today, a lot adults probably remember arcades being popular in the 70s and 80s. Games like “Pac-Man”, “Donkey Kong” and “Pong” are such games.
Let’s look into the history of arcade games.
The one that paved the way
Pong was released back in 1972 by Atari, it was a two-player game involving a screen, two movement sticks and a screen. This was one of the initial arcade machines and its gameplay was simple and easy to grasp. It was like playing tennis but instead of running around the court, you used virtual paddles that move on a vertical axis and instead of a ball, you had a small white pixel that represented the ball.
This concept was so simple and so fun that it sold 19,000 arcade cabinets and paved the way for Atari to become one of the biggest names of the early video game industry. Atari was the juggernaut of its era, aside from arcade cabinets, it also sold home consoles like the Atari 800 (which was a computer system) and Atari Video Computer System (AVCS).
But other than the console manufacturers, you have third-party game developers. Taito Corporation produced the world-renown Space Invaders, Nintendo released Donkey Kong and Namco which released Pac-Man, Galaga and Dig-Dug.
All of these popular arcade games were later ported to home consoles like the Atari AVCS and 800 and their competitors like IBM who produced the IBM Personal Computer and Sinclair ZX81.
This transition between home consoles and home computers is one of the factor that caused the video game market crash in the early 1980s.
Fall of Video Games
The video game market crash was a significant event as there was an over flooding of games and consoles into the market. At the peak there was a physical burial of over 700,000 excess cartridges buried in a landfill at Alamogordo, New Mexico.
The news of the video game market crash also severely impacted the public view of games and the viability of the industry with analyst predicting that the industry was crippled due to the amount of third-party developers that could release games for multiple consoles as well as the amount of games a developer could publish and the quality of said games.
Return of the Console:
The over saturation of the market from both consoles and computers alongside the immense amount of games were the reasons why the video game crashed in the early-to-mid 1980s. It was also during this time that one company manage to prosper and bring about what would be the revival of video games and home consoles.
Shaping the industry
In July of 1983, Nintendo released the third generation 8-bit home console known as the Famicom (also known as family computer). The Famicom released with ports of popular Nintendo arcade games, namely “Donkey Kong”, “Donkey Kong Jr.” and “Popeye”.
Nintendo soon got the licenses to produce third party games by Hudson Soft and Namco at a 30% fee for console licensing and production costs, a rate that continued in the industry for consoles and digital storefronts through the 2010s. On top of this, Nintendo released their original Intellectual Properties (IPs) such as “Super Mario Bros.” and “Duck Hunt” and “Ice Climbers”.
The console did well enough in Japan that Nintendo wanted to launch it in America, but with the video game crash, American consumers were fatigued, and console manufacturers are not as keen to work with Nintendo.
The Era to be Remembered
This led to Nintendo rebranding the Famicom to the ever so iconic name, Nintendo Entertainment System (NES) in 1990. They chose to brand the console as an entertainment system to step away from the previous generation’s home console/computer branding. The system was made to be more as an advance toy than video game system for children and went on to be one of the most popular consoles of its era and produced some of the longest running franchises we have to date like “Legend Of Zelda”, “Metal Gear” and “Final Fantasy”.
Nintendo led the path to many of the genres and games we hold dear today, side scrollers like Super Mario bros
The NES is one of the best-selling systems of its era with a total of 61.91 million units sold as of 2009 (the repair and replacements services closed as the parts were scarce). But Nintendo would find its match soon.
Console Versus Console:
Console wars refer to mainly to mega consoles of a generation which have their own perks from better hardware specifications to better exclusive video game titles. The term console war never fades and is still used in lingo today. But the history of console wars is one that is unique to each generation of consoles after the Nintendo Entertainment System(NES).
Towards of the end of the NES lifecycle, Sega spawned the Sega Masters System as a direct competitor. It slowly built its following and with technology advancing so rapidly, a newer generation of video game consoles were released. For Sega, this console would be the Sega Genesis(or Sega Megadrive)
The Sega Genesis was shipped with a mascot, the ever popular “Sonic the Hedgehog” in 1989. Sonic was to Sega what Mario was to Nintendo, an icon of instant association. The Sega Genesis was also known for its non-censoring of arcade game ports like Mortal Kombat.
It was marketed as the “cooler console” and did well in America. It had multiple console exclusives and churned out titles faster than Nintendo. It had faster processors and better visuals but with all the uncensored violent content that emerged, it brought about the discussions of whether video games made children violent.
Titles make the console
Although the Genesis sold well in America, the Super Nintendo Entertainment System (SNES or Super Famicom) would overtake it eventually and become the most iconic console of the era, having a solid fanbase for its games even till today.
The SNES housed the most iconic games that shaped the standards for games today. Titles like “Chrono Trigger”, “Super Mario World”, “Legend of Zelda: A Link to the Past”, and “Star Fox”, are games that laid the foundation and expectation of what was expected of the generation. The games that it supported ultimately won more favour and the console was better received, not just in America but Japan as well.
This would be considered the first console war and it laid the foundation, better specifications does not mean better titles. The SNES sold 49.1 million units while the Genesis sold 35.35 million units.
2D to 3D
In the 90s, CDs were the rage and Sony wanted to work with Nintendo to produce a console that uses CDs over cartridges. Nintendo ultimately turned Sony down as they wanted to keep the cartridge system and Sony decided to move forward and launch their first console - PlayStation.
PlayStation was a revolutionary console. Launched in 1994, third-party developers saw an opportunity to make bigger and better games for a lower price compared to paying for the cartridges of Nintendo. PlayStation held some of the most renown titles of its era including the ever-popular Final Fantasy 7 and the original Resident Evil.
Sega Saturn launched in 1995 and was the other CD based console in the running, although the Sega Genesis sold well, the Saturn did not sell as well and would be the beginning of the end for Sega’s console war.
The winner of the last generation, Nintendo, entered this generation with the Nintendo 64 in 1996. It was by no means a superior console but like its predecessors before, it came with Nintendo’s exclusives. Mario got Super Mario 64, Legend of Zelda had Ocarina of Time and the first Super Smash Bros. was made, as well as the iconic Golden Eye 007.
This era of games was the foray into 3D games and the beginning of the more common modern video games. The PlayStation sold 74.34 million units, the Saturn sold 9.26 million units and the Nintendo 64 sold 32.93 million units.
Video Games of our Era:
Sega launched what would ultimately be their last console, the Sega Dreamcast in 1998. They couldn’t match the sales of the PlayStation or N64 and in term of specification was not close to matching up with the new generation console.
Sony launched the PlayStation 2 in 2000 and with it a whole new wave of games, including Kingdom Hearts 2, God of War 2, Resident Evil 4, Shadow of the Colossus and Grand Theft Auto 3.
The console was also backwards compatible meaning it could run the original PlayStation games and has an ability to read DVDs.
Nintendo launched the Gamecube in 2001 which had Super Mario Sunshine, Legend of Zelda: Windwaker and Super Smash Brothers Melee. The lack of titles was due to Nintendo’s control over the third party system during the NES and SNES days and their refusal to switch to CD’s in the N64 generation. The markup price with the cartridges also hurt their popularity with third-party developers.
Microsoft launched the XBOX in 2001, which was popular in America and Europe. It was the first console to have a online feature/service called Xbox Live and would pave the way for online gaming with the launch of Halo 2.
It was around this era that e-sports had begun to brew, competitions for multiplayer games like Halo and Super Smash Bros. began to pop up along side popular PC games like Starcraft.
The PlayStation 2 manage to sell 155 million units triumphing over Xbox’s 24 million units and Gamecube’s 22 million units.
The rise of Internet Culture
With the past generation introducing online play, the newer generation would harness it and push online services to the forefront, making an experience like couch gaming irrelevant.
The Xbox 360 and the PlayStation 3 launched in 2005 with Nintendo Wii releasing in 2006. All 3 saw success internationally with their niche set of audience.
Xbox was the cheaper, more accessible model and had almost the same games as the PlayStation 3 with its own motion capture system - Kinect. It also become the first console to utilise the online subscription service and online cooperative play with strong exclusive franchises like the Halo Franchise and Gears of War Franchise.
PlayStation had a bit of a rocky start with its high price point, but it settled nicely with its exclusive titles and focused more on the single player titles and third-party games.
Both consoles had award winning titles from some of the best developers and the age of internet breath life into the playthroughs and reviews. This caused a huge spike of gaming content on Youtube and social media and placing gaming into the mainstream media’s eye.
Nintendo focused on its family friendly branding and release games for everyone, it used a unique motion capture system that appealed to all ages and came with a free game on purchase.
The Nintendo Wii was so popular due to its simplicity in usage that it became the most popular and most console of the generation.
The Current Era
The success of online multiplayer and online subscription was so effective that PlayStation started the PS+ service to entice online membership and play. With the launch of the Xbox One and PlayStation 4, the current generation of consoles was born.
The games that started as exclusives slowly bundled into other platforms. The birth of indie developers such as Shovel Knight, Undertale, Minecraft and Fez are good examples. First-to-third party game developers had to choose between a good single player campaign or a multiplayer that could last.
Competitive Gaming was put under the spotlight, although consoles had little competitive showing when compared to the PC world.
Consoles in the current era fit a niche, they are for exclusive titles that belong to certain companies. Few companies will be able to keep their exclusive titles and gimmick.
The latest Nintendo Switch is a portable and home console hybrid. Nintendo with their tradition of exclusive titles will be able to last this generation but PlayStation and Xbox will need to depend on their player base and titles to keep afloat.
But consoles are not all that gaming industry has to offer for video games have gone mobile and continued to have a strong presence on computers.
Handheld games are something of an oddity. They have a niche audience and have a sense of connectivity and inclusivity. They are something you can play on your own on a train ride home or with friends at a party. They offer a simple and fast alternative to the things “hardcore” gamers are used to but where did it start?
Nintendo was the resurgence of console gaming, but it was also the birth of the modern handheld gaming we know today. In the 80s-90s, Nintendo produced a series of handhelds electronic games called Game & Watch which came with one game and two Liquid Crystal Display (LCD) screens. It had an easy mode and a hard mode, and the screens had a pre-set overlay to tell you which Game & Watch had which game.
In 1989, Nintendo launched the Game Boy, the first proper handheld game console that allowed interchangeable ROM cartridges, so you were not stuck to one game like the Game & Watch. The Game Boy was an international phenomenon that allow you to play some of the best games of the era on the go like Tetris, Dr. Mario and Pokemon. Pokemon would later spin into the long ongoing media franchise we have today.
The successor to the Gameboy, the Game Boy Colour came almost 10 years later in 1998. It allowed you to play in colour and had better processing unit. This was followed with the Game Boy Advance in 2001 and introduced a built-in back light for the screen as well as a rechargeable battery.
Moving away from the Game Boy and taking in the aesthetic of the Game & Watch produced the Nintendo Dual Screen or Nintendo DS for short. It came out in 2004 with the DSi, which had downloadable software capabilities and two cameras, to launch in 2008. The Nintendo DS brought to us improved graphics, touchscreen gameplay and wireless online play.
Shortly after the DS was released, PlayStation launched the PlayStation Portable. It was meant to be a direct competitor with the DS. The PSP sold well and had unique multiplayer games and unseen titles. It also ported spinoffs of home console games like God of War and Final Fantasy: Crisis Core.
The 3DS was launched in 2011 and boasted the capability to play in 3D without the need for 3D glasses using auto-stereoscopy, a later improved version called the “new”3DS was released with an extra control stick and shoulder buttons alongside an improved processor.
To rival the 3DS, Sony launched the PlayStation Vita in 2011. It had a better processor unit but did not have a strong support at launch, with few titles to play and a drying player base, the Vita slowly faded into obscurity.
From Handheld Console to Mobile phones
This shift to portable gaming was out of convenience. As our smartphones get better, its got better at running more taxing applications.
The phones we have nowadays not only allow us to emulate console like the SNES or Nintendo DS whilst still having the ability to use the phone normally.
When smart phones first arrives, flash games, Gravity Guy, Angry Birds, Plant Vs Zombies and Fruit Ninja all all the rage. Then we got access to some old console titles (thou most had faded out of the app stores) like PlayStation 2 games like Grand Theft Auto: San Andreas and Dead Space.
More games started to appear in the mid 2013 onwards with Freemium games such as Candy Crush and Clash of Clans. They were popular free-to-play games, but they charged real currency for some in-game items. Sometimes, they may also be pay to win games as gamers purchase resource items to fast track their progress instead of putting in hours in the game.
Gacha games also started to trickle into the market and became extremely popular. These were collector games that released characters for collection every month, sometimes making those characters so good in gameplay that players are sort of taxed for not having it on online play.
However, a large surge of mobile gamers came with waves of popular Multiplayer games, in 2016 we had Pokemon GO, in 2017 we had Mobile Legends, in 2018 and in 2019 we had Fortnite and PUBG. Large droves of people found communities within those games and those game had low commitment without a need to sit down for half an hour to finish a round. The games were for groups of friends but could also easily suck people in for hours. These games charge for cosmetics instead of resources. The game entice you to top up and purchase the cosmetics for the character you use.
Mobile games are like a bag of chips, they are something you can have easy access to and are made to be as addictive as possible drawing you back with daily login bonuses and events.
Customisable to your needs:
The biggest faction of e-sports is PC gaming. It has such a broad range of games due to the amount of possible command keys you can set, from action games to adventure-based games, real-time-strategy games to dating simulators.
So why did PC become the platform most people play on?
As the power of prebuilt computers grew, the cost of components went down. The graphics and processor used to power a console looks obsolete to PC owners who can buy the latest components.
As the consoles had to be prebuilt and set at a certain price tag, the components are chosen to be mass produced to target the niche audience while a computer was customisable to the user. A user can always upgrade their computer to match the console or surpass it.
At that point the question became, why play on console if you could have a better experience on my computer? And the answer is comfortability.
The difference is you
Where some people enjoy the keyboard and mouse, others prefer a controller that fits snuggly into your hand. But some games lack the ability or are hindered when brought to the consoles due to lack of command keys. Computers built for gaming are meant to be able to tank through long gaming sessions without breaking down and bringing you the best experience available.
That is also the reason why competitive e-sports that are played on the highest level are usually on PC. There is low chance of input lag if the computer is over optimised for the game.
Competitive e-sports also tend to have high prize pools. For example, at the point of writing the current highest prize pool in the world is USD $34.3 million. This is the prize pool for Dota 2’s The International 9 - 2019.
Fortnite has donated USD $100 million prize pools for the year of 2018 and 2019 with the champion of the annual tournament taking home USD $3 million.
The production value that goes into streaming and hosting the tournaments are big too and will continue to have a major impact on host countries who could be looking to increased tourism rates during the period of tournament play.
Closing thoughts for the series
Newer games will breed a new generation of gamers and a new generation of IPs. The next flywheel will not be created by Disney, but by a gaming company. Nintendo with its huge IP will be the logical conclusion but we believe there is multiple companies which are creating new games/IP who are poised to make themselves more than just a gaming company.
We had just published our latest Unrecognised Growth Portfolio #2 which is a profitable video game publisher in China in a Special Situation. To view the latest recommendation , do subscribe to our newsletter @ $88 per year.
Or alternatively, contact us to send us an investment article you had written which is meant to be publish exclusively on this site. We will give you a 1 year free subscription in return for your work!