The Famicom Just Turned 30. Let's Talk About the Whole Console Market It Created | QDaily Business History

With this column, QDaily Business History, we want to tell you how the world got to be the way it is today.

On October 18, Sony PlayStation's official Twitter account posted: "Dear NES, happy 30th birthday, and thank you for paving the way."

NES, short for Nintendo Entertainment System, was the North American version — released on October 18, 1985 — of the Family Computer (FC), the home game console Nintendo had first launched in Japan on July 15, 1983. For any product, there is no better praise than a rival saying so out loud. And this console really was the beginning of the modern home game machine. It has another name you know better: the Famicom.

The Famicom brings back the 1990s — sitting in front of the TV with your friends, playing Mario or shooting ducks. Though for an ordinary working family, an import like the Famicom was out of reach. Most of us used a Subor "learning machine" instead: a learning machine in name, a game machine every single day in practice. The slogan "Ah, Subor — endless fun!" and all those X-in-1 cartridges were, for a lot of people, their first taste of games.

I've always thought the FC was a beautiful piece of design.

What we probably didn't know at the time was that this treasure in our hands had been the hottest thing in Japan and North America a decade earlier. The Subor was, at bottom, a copy of the FC — but for a small kid, two letters were much harder to remember than the name Subor.

Those two letters carried a lot, though. No console before it had ruled the market for so long: from its launch in 1983 to its discontinuation in 2004, Nintendo sold 61.91 million Famicoms in a little over two decades. It rescued a North American console market that was on the point of collapse. Put simply: without the Famicom there would be no $25.1 billion home console market today, no such wealth of games born on consoles, no PlayStation 4 or Xbox One to play — and far fewer games on your PC as well.

So whether you're holding a controller or a mouse right now, you owe the Famicom some thanks. You may also want to know where this machine came from.

1981: Build a Home Console That Can Run Donkey Kong

In 1981, Nintendo's staff were still enjoying the sales of the Game & Watch. Released the year before, the Game & Watch was a handheld LCD console; its game about two firefighters catching people falling from a building, plus a genuinely useful clock and alarm, made it the ruler of handhelds at the time.

Nintendo's president, Hiroshi Yamauchi, was not satisfied. He asked for a new product that would go beyond the Game & Watch: a console everyone could afford, and one that could hold the market long enough to matter. The hit games of the day all lived in arcades, and what Yamauchi wanted was a way to move the arcade into the home, so people could play arcade games in their living rooms. That needed a home console.

Home consoles already existed, of course. Nintendo had put out the Color TV-Game 6 in 1977; it and its second-generation model, the Color TV-Game 15, sold a million units in Japan. But back then, this is what a console's picture looked like:

Such a product could never meet Yamauchi's demand. The game he wanted was Nintendo's own arcade hit, Donkey Kong, which looked like this:

That asked a great deal of the hardware. And in the spirit of wanting the horse to run fast without feeding it grass, Yamauchi also insisted the whole machine cost under 10,000 yen to make — really a way to take the market with a low price. Remember that the Color TV-Game had sold for more than 15,000 yen, the priciest model as high as 40,000.

In the end the target was met. Masayuki Uemura, then second-in-command of Nintendo's engineering division, led a large group of young engineers through the hard part. That was one of Yamauchi's tactics: young people liked playing games, and they worked harder at bringing the arcade home for everyone else. By simplifying the colors, adjusting the memory, and dropping parts the machine didn't need — an optical drive, a modem — the team pushed the price down to 14,800 yen.

1983: Selling Consoles Means Selling Games

On July 15, 1983, Nintendo's Family Computer went on sale. It was the first home console in the modern sense: 56 colors on screen at once, an 8-bit processor. For home consoles up to then, it was a leap.

If you have seen an original Family Computer (FC for short), you know why it is called the red-and-white machine. The body looked like a toy, painted deep red and white — the red said to come from Yamauchi's personal taste. Two controllers plugged into either side, each with the cross-shaped D-pad invented by Gunpei Yokoi, then the top engineer in Nintendo's hardware division. Very modern for the time.

The games mattered more. The FC shipped with three of them: Popeye, Donkey Kong and Donkey Kong Jr. — all made by Nintendo itself, all big hits in arcades already.

Yes: from the start, Nintendo's idea was to sell its console on the back of its own popular games. But first-party games alone were not enough. Hudson and Namco joining in is what finally settled the FC's rule over Japan. Both made game software, and both were drawn by how well the FC handled arcade ports. Hudson developed the original game Lode Runner with Nintendo; Namco knocked on Nintendo's door with the famous arcade titles Galaxian and Pac-Man, and ported them to the FC.

With that, Nintendo created the arrangement in which first-party and third-party games live side by side on one console. At that point the FC itself had sold only about 1.3 million units, while Lode Runner alone passed 1 million copies. Games pulled console sales up hard, which in turn drew in still more publishers — Square, Konami and others — to make games for Nintendo. In 1984 the FC had 20 different games; in 1985, 69; in 1991 it peaked at 151.

The Famicom's launch was not smooth. Many machines stopped responding to controller input, and Nintendo had to run a large recall that cost millions of dollars. Even so, by the end of 1984 the FC had sold more than 2.5 million units in Japan, and more than a third of Japanese households owned one.

Which taught Nintendo — and everyone who has been in the console business since — a lesson that could not be simpler: to sell consoles, you need better games, and more of them.

1985: A Gamble in North America

In 1985, on the strength of how well it had done at home, Nintendo decided to enter North America, with the United States as the main target.

It was a gamble.

The American game market had just been through a crash. A flood of shoddy, copycat games had wrecked a business that was booming in the early 1980s. The few gaming magazines still standing in the US doubted Nintendo would get anywhere. That March, one of them, Electronic Games, wrote: "The American video game market has effectively disappeared… this will prove to be a misjudgment on Nintendo's part."

American store owners simply didn't want to stock the thing — some were still trying to clear game software left over from years before. Luckily Minoru Arakawa, then head of Nintendo of America and Yamauchi's son-in-law, refused to give up. He made a gamble of his own: without telling Yamauchi, he promised retailers a full refund on any console they couldn't sell. He also gave them demo units to set out in the store for free play. On terms that generous, Nintendo finally had a sales channel in the US.

On October 18, 1985, the FC — renamed the Nintendo Entertainment System, or NES — went on test sale in New York, 100,000 units in the first run. Seventeen different games ran on it, two of them bundled with the machine.

The full set of NES accessories at the time

Nintendo did work hard to keep the American market from remembering the bad years. In its marketing it stressed that the NES was a toy, not a game console. The Famicom's shape became a big gray box named the Nintendo Entertainment System, chosen to dodge the words "game" and "computer." The first NES television ad pointed the camera not only at R.O.B., the robot accessory, but at the light gun players used to shoot ducks on their screens — rather than the joystick Americans associated with the old machines. All of it said the same thing to American shoppers: this is not the game console you remember.

The sales, in the end, came out about as the gaming press had predicted. On the eve of the 1985 Christmas holiday, the peak of consumer spending in North America, retailers had sold barely half their stock. At $199 (about $439 today) the console was not cheap, and games like duck shooting were not especially compelling.

1987: Mario and the NES Take the Throne

What finally put the NES on the throne of the North American console market was Super Mario Bros. The game, born in Japan in 1985, reached North America in 1987.

Everyone was hooked by this mustachioed man hopping across platforms, bonking bricks, eating coins and mushrooms. Players had grown used to a run of bad games with new names on old ideas, and had come to think that a home console held nothing but volleyball, ping-pong or tennis in fresh packaging. Then this plumber in overalls stomped them awake: this is a game.

Even by today's standards, the 30-year-old thing holds up. Its core is simple and clear, easy to pick up, yet those simple moves connect to each other in ways that give the game real depth: with the same jump you can dodge, knock a brick from below, or land on a turtle.

So Super Mario Bros. and the NES gave the whole North American game market its confidence back. To this day Mario stands in America roughly where Mickey Mouse stands, and Mario's father, Shigeru Miyamoto, is Japan's Walt Disney. Plenty of "greatest games" lists lean toward Nintendo; call it bias if you like.

In the end, the console Americans had doubted came to rule the US market on the back of Super Mario Bros. In 1987 the NES sold 3 million units, three times the year before. By the 1990s it had sold 27.59 million in all and held 90% of the American home console market. Until the FC's successor, the SFC, arrived, nothing on the market could take its place.

Nintendo's gamble had paid off.

Interlude: The Famicom and Its Rivals

The FC was the absolute king of its era, but it did have a rival: Sega. Sega today is only a game software publisher, but in the 1980s it was the one company that could compete with Nintendo in home consoles.

Sega had not set out to make a home console at all. It made learning machines. In 1980, after the first personal computer, the Apple II, arrived, the idea of computers and programming swept the world. A kind of "learning machine" became popular — it plugged into a TV and came with programming built in. It was far weaker than a real computer but cost a tenth as much, and it was good enough for children to play simple games and try a little programming. So many parents, worn down by their children's pleading, bought one.

Sega's first home machine was exactly that: the SG-3000. Alongside it came a more game-oriented model, the SG-1000.

Unfortunately, the day Sega put those two products on sale — July 15, 1983 — was the day Nintendo's FC went on sale too. Because Sega's machines were not built for games, their picture quality fell well short of the FC's, and they lost. Nintendo, meanwhile, rode the learning-machine wave itself, releasing Family Basic: a keyboard and programming cartridge for the FC. Its programming was ordinary, but the pleasure of playing games with a better picture clearly appealed more to children and young people.

Sega could not swallow that, and on October 20, 1985, it brought out a new machine: the Sega Mark III. At 15,000 yen, this console was plainly built to take on the FC. Arriving two years later, it beat the FC on both picture and performance, and Sega ported over its own arcade hits, among them Space Harrier and Breaking Through the Firing Net (《冲破火网》). On top of that, the Sega Mark III could run the cartridges made for the SG-1000 and SG-3000. For a moment everything looked to be going Sega's way.

The final tally: the FC sold 61.91 million units over its life, Sega only 14.8 million. In Japan the gap was wider still — 19.35 million against 1 million.

Sega lost on software.

Nintendo, which had opened up the third-party publisher arrangement, held too big a lead there. By 1985 it had signed agreements with Namco, Konami, Capcom and Bandai — names still famous today. Their games could only come out on the FC, and Nintendo controlled both quality and quantity tightly.

Sega tried hard to port its arcade games over, but it could not match those numbers. Worse, so many publishers were building games tuned to the FC's hardware; Sega's home machine, a technical tier below arcade hardware, could not fully keep up on picture or on game performance. And when shooters, Sega's specialty, began to lose ground to RPGs (role-playing games) and text adventures, Sega's only option was to spend heavily and build an RPG itself. It did finish one, Phantasy Star, and it tried working with third-party publishers too, but by then it was too late.

Nintendo was not worried in the slightest. Thanks to the division of labor and the partnership system, it could sit and wait for other studios to fill in whatever it lacked. In 1986 came Dragon Quest, developed by Square (the same Square that later merged with Enix into Square Enix), with art by Akira Toriyama, who drew the Dragon Ball manga. As the founding title of the Japanese RPG, Dragon Quest sold 1.5 million copies that year — and you could only play it on the FC. So which company's console would you buy?

Sega did save some face in other markets. Because Nintendo's huge success in Japan and the US left it little attention for anywhere else, Sega got into Brazil first while Nintendo was stuck outside it, worn down by high tariffs and heavy piracy, and sold 4 million Sega Mark IIIs there. In Europe it beat Nintendo too, moving 7.67 million consoles.

1990: An Heir Arrives

When Yamauchi set the FC in motion, he said he wanted a product with no competitor for three years after launch. In a sense he got it: among consoles of that era, only Sega's Mark III could even barely compete, and nothing else came near. The FC kept that edge until around 1990 — the year it sold 7 million units in the US, 2 million fewer than in 1989.

That was because from 1987 on, consoles far more powerful than the FC began appearing. For a product four years old, the FC's picture and performance had started to look dated.

The first to challenge the FC's rule was Nintendo's old ally Hudson. Having supplied some of the FC's first third-party games, Hudson knew the machine's strengths and weaknesses well, especially the hardware limits set by early-1980s technology and cost. So Hudson joined the Japanese hardware maker NEC Home Electronics to build a console called the PC Engine. Beyond beating the FC on graphics, sound and processing speed, its biggest feature was treating the console as a core you could extend with a drawing tablet, a keyboard, an optical drive and more. The PC Engine was also built very small, which made it expensive: 24,000 yen, 10,000 more than the FC.

Nintendo's old rival Sega was not about to be left behind either, and in 1989 released the Mega Drive at a launch price of 21,000 yen. Its CPU was 16-bit against the FC's 8-bit, which marked the birth of the fourth console generation.

Besides being far ahead of the FC on performance and graphics, Sega had learned from its earlier defeat and began working with publishers like Namco and Konami, copying Nintendo's approach to third-party developers.

While its rivals scrambled over home consoles, Nintendo took its time and released the Game Boy in 1989 — the ancestor of the GBA many of us played as children. Because Arakawa secured Tetris, the Game Boy became the hottest machine of its day; the GB version of Tetris alone sold 3 million copies.

In home consoles, Nintendo finally shipped the FC's successor in 1990: the Super Famicom, or SFC. It came late, but on the back of games like Super Mario World it still sold 49.1 million units worldwide. Under competitive pressure and with technology moving on, the SFC used a 16-bit CPU too — which formally announced the FC's exit from the console fight.

Subor brought a lot of us joy (though "us" doesn't include Jackie Chan)

Still, when the FC reached South Korea and China in the early 1990s, it became a favorite all over again in both countries. Right as you were playing your beloved Famicom, or its knockoff the Subor, it was already turning into a collector's item elsewhere in the world. People never stopped loving the games, though: many installed the Famicom classics on modern consoles through emulators. From 2006 on, players could get those classics on the Wii cheaply or with points.

In 2003, on the Famicom's 20th anniversary, Nintendo announced the FC would stop production. In 2007 it announced the formal end of repair service for the FC line. With that, the machine that laid the foundation of the modern game industry came to the end of its life.

Famicom Prequel: The Crash of a Game Industry

However well it sold, the Famicom was after all a third-generation home console. It owes its ancestors some thanks.

The first generation is best represented by the Magnavox Odyssey, released in 1972. At that stage every home console produced its game through circuitry built into the machine, which meant one machine could play one game.

The most famous of the first generation was Atari Pong, released in 1975 by the American company Atari. The Pong built into it was the first home video game. It was only a few rectangles and numbers, but that was enough to give people of the day real pleasure.

Nintendo's TV-Game 6 and TV-Game 15, mentioned earlier, belong to the same generation. Nintendo claimed you could play 6 and 15 games on them, but in practice the circuits simply switched to produce slightly different pictures: volleyball, tennis, ping-pong, a shooting game, and one- and two-player modes of each — padded out by brute force into 15 games.

The product that marked a new generation was the Atari 2600, also known as the Atari VCS (Video Computer System), which went on sale in September 1977. It defined the second generation of home consoles: games were no longer soldered into the machine's circuits but programmed onto cartridges the console read.

That changed the whole industry. Once the software came out of the box, the console itself got cheaper and games could be updated and swapped endlessly. Most important, it split the game software business from the hardware business — companies devoted purely to making games were born in this period, Activision and Electronic Arts among them.

The result was an enormous market. In the five years after launch, with far more games to play and successful ports of arcade hits like Pac-Man and Galaxian, the Atari 2600 sold more than 10 million consoles, a figure that reached 19 million by 1984.

Without the Atari 2600, Nintendo's later strategy of selling hardware and software together would have been impossible. But the 2600 left Nintendo more than that: by dying, it gave rise to another Nintendo model.

The boom Atari brought to North America pulled a crowd of companies into making game software. Firms like Quaker (the oatmeal people) and Mattel (the Barbie people) started publishing games of their own. The market filled with Pac-Man imitations — pixel-for-pixel copies given a new name and shipped as new releases. With the media business still thin back then, a player could only choose a game by buying it and finding out: spend a few dozen dollars at the game store on something terrible, and it breaks your heart.

From 1982 onward, the North American market produced no third-party game with a new idea in it. That same year brought the famous E.T. affair. The game, adapted from the film of the same name, was manufactured in 4 million copies and sold 1.5 million; the remaining 2.5 million were dumped at a tenth of the price. A famous and true story has it that the unsold E.T. cartridges filled 14 trucks and were buried in a desert in New Mexico.

Last year, those games buried in the ground really were dug up.

Nobody wanted to take a chance on a game anymore. And if the software won't sell, the console has no reason to exist.

Many companies left the home console business after that. Quaker and Mattel ran; plenty of small developers went under. Warner, Atari's parent, watched its stock fall from $60 to $20. In 1984 Atari released the 5200, an upgraded 2600, and never came close to the sales it expected. The words "video game" made everyone flinch and step away. In the press of the time, the entire game market had all but disappeared.

So now you know what Nintendo was walking into in North America in 1985.

From then on, Nintendo understood how much a console depends on the quality of its games. So it leaned first on first-party games, which it could vet itself; and later, when it worked with third-party publishers, everything had to run by Nintendo's strict rules: Nintendo reviewed the quality, Nintendo approved the quantity, publishers could not release on rival platforms, and they had to pay all production costs up front, among other conditions.

That is why games on Nintendo's consoles stayed so consistently good — strict with itself, stricter with everyone else. How that same rigidity and high-handedness soured Nintendo's relations with third-party publishers in the mid-to-late 1990s is a story for another time.