User: What is a console war in video games?

Context:
In the video game industry, a console war describes the competition between two or more video game console manufacturers in trying to achieve better consumer sales through more advanced console technology, an improved selection of video games, and general marketing around their consoles. While console manufacturers are generally always trying to out-perform other manufacturers in sales, these console wars engage in more direct tactics to compare their offerings directly against their competitors or to disparage the competition in contrast to their own, and thus the marketing efforts have tended to escalate in back-and-forth pushes.

While there have been many console wars to date, the term became popular between Sega and Nintendo during the late 1980s and early 1990s as Sega attempted to break into the United States video game market with its Sega Genesis console. Through a novel marketing approach and improved hardware, Sega had been able to gain a majority of the video game console market by 1991, three years after the Genesis’ launch. This caused back and forth competition between the two companies throughout the early 1990s. However, Nintendo eventually regained its market share and Sega stopped making home console hardware by 2001.
Assistant: The video game console market started in 1972 with the release of the first home console, the Magnavox Odyssey. As more manufacturers entered the market and technology improved, the market began to coalesce around the concept of console generations, groupings of consoles with similar technical specifications that vied in the consumer marketplace. Since 1972, there have been nine such console generations, with two to three dominant manufacturers controlling the marketplace as an oligopoly.

As with most industries without a single dominant leader, console manufacturers have marketed their products in a manner to highlight them in a more favorable manner compared to their competitors', or to focus on features that their competitors may lack, often in aggressive manners. For example, console manufacturers in the 1980s and 1990s heavily relied on the word size of the central processor unit, emphasizing that games had better capabilities with 16-bit processors over 8-bit ones. This type of aggressive marketing led video game journalists to call the competitive marketing a "war" or "battle" as early as August 1988. As each new console generation emerged with new marketing approaches, journalists and consumers continued to use variations of the "war" language, including "system wars" and "console wars". By the early 2000s, the term "console war" was most commonly used to describe heated competition between console manufacturers within any generation.

While not the only console war, the rivalry between Sega and Nintendo for dominance of the North American video game market in the late 1980s and early 1990s is generally the most visible example of a console war. It established the use of aggressive marketing and advertising tactics by each company to try to gain control of the marketplace, and ended around 1995 when a new player, Sony, entered and disrupted the console space.

The United States video game industry suffered a severe market crash in 1983 from numerous factors which led to a larger market recession and increasing popularity of personal computers as a video game platform. A key contributing factor to the crash was the loss of publishing control for console games. Early success by some of the first third-party developers like Activision for the Atari VCS console led to venture capitalists bringing in teams of inexperienced programmers to try to capture the same success, but only managed to flood the market with poor quality games, which made it difficult for good quality games to sell. The video game crash impacted other factors in the industry that were already in decline, such as video game arcades.

In Japan, Nintendo had released its Famicom (Family Computer) console in 1983, one of the first consoles of the third generation or the "8-bit" generation. Japan did not have a similar third-party development system in place, and Nintendo maintained control on the manufacturing of game cartridges for the Famicom using a licensing model to limit which third-party games were published on it. The Famicom did launch with a technical fault that Nintendo scrambled to fix, but by the end of 1984, the Famicom was the best-selling console in Japan. Nintendo looked to release the unit in the United States, but recognized that the market was still struggling from the 1983 crash. Nintendo took several steps to redesign the Famicom prior to a United States launch. It was made to look like a VCR unit rather than a console, and was given the name the "Nintendo Entertainment System" to distance it from being a video game console. Further, Nintendo added a special 10NES lockout system that worked as a lock-and-key system with game cartridges to further prevent unauthorized games from being published for the system and avoid the loss of publishing control that had caused the 1983 crash. The NES revitalized the U.S. video game industry and established Nintendo as the dominant name in video game consoles over Atari. In lifetime sales, the NES had sold nearly 62 million units worldwide, with 34 million in North America.
At the same time, Sega was looking to get into the video game console industry as well, having been a successful arcade game manufacturer, but due to the downturn in arcade game business, looked to use that expertise for the home market. They released the SG-1000 console in Japan the same day as the Famicom in 1983, but sold only 160,000 units of the SG-1000 in its first year.

Sega redesigned the SG-1000 twice to try to build a system to challenge Nintendo's dominance; the SG-1000 Mark II remained compatible with the SG-1000 but failed to gain any further sales. The next iteration, the Sega Mark III, was released in 1985, using Sega's arcade hardware for its internals to provide more refined graphics. The console was slightly more powerful than the Famicom, and Sega's marketing attempted to push on the more advanced graphics their system offered over the Famicom. However, Sega found that Nintendo had also contracted other developers to only develop their games exclusive to the Famicom, and Sega was forced to develop their own titles or to port the games from the other developers themselves, limiting the size of the Mark III's library in Japan. Sega attempted to follow Nintendo with a worldwide release of the Mark III, rebranded as the Master System. The Master System was released in the United States in 1986, but Nintendo had similar licensing practices in the U.S. to keep developers exclusive to the NES, limiting the library of games that Sega could offer and to also ensure that another gaming crash didn't begin. Further, Sega's third-party distributor, the toy company Tonka, opted against localizing several of the Japanese games Sega had created, further capping the game library Sega could offer in the U.S. Only a total estimated two million systems were sold.

The Sega and Nintendo console war primarily centered on the launch of the Sega Genesis to try to outsell the Nintendo Entertainment System in the United States.
The fourth generation of video game consoles was started by the launch of NEC's PC Engine in 1987 in Japan. While the PC Engine used an 8-bit CPU, it included 16-bit graphic rendering components, and NEC marketed this heavily as a 16-bit game console to distinguish it from the Famicom and Mark III; when NEC brought the PC Engine worldwide, it was rebranded as the "TurboGrafx-16" to emphasize this. After the release of the TurboGrafx-16, use of the bit designation caught on. Which led manufacturers to focus their advertising heavily on the number of bits in a console system for the next two console generations.

NEC was another competitor to Sega and Nintendo. Following a similar path they had done for the Mark III, Sega used their arcade game technology, now using 16-bit processor boards, and adapted those into a home console, released in Japan in October 1988 as the Mega Drive. Compared to its prior consoles, the Mega Drive was designed to be more mature-looking and less like a toy compared to the Famicom to appeal to an older demographic of gamers, and "16-bit" was emblazoned on the console's case to emphasize this feature. While the system was positively received by gaming magazines like Famitsu, it was overshadowed by the release a week prior of Super Mario Bros. 3 for the Famicom.

As with the Master System, Sega also planned for a major push of the Mega Drive into the United States to challenge Nintendo's dominance among other markets, with the unit rebranded as the Sega Genesis. Sega was dissatisfied with Tonka's handling of the Master System and so sought a new partner through the Atari Corporation led by Jack Tramiel. Tramiel was bullish on the Genesis due to its cost, and turned down the offer, instead focusing more on the company's computer offerings. Sega instead used its dormant Sega of America branch to run a limited launch of the console in August 1989 in test markets of New York City and Los Angeles, with its launch system being bundled with the port of the arcade game Altered Beast.

In October 1989, the company named former Atari Entertainment Electronics Division president Michael Katz as CEO of Sega of America to implement a marketing strategy for a nation-wide push of the Genesis with a target of one million consoles. Katz used a two-prong strategy to challenge Nintendo. The first was to stress the arcade-like capabilities of the Genesis with the capabilities of games like Altered Beast compared to the simpler 8-bit graphics of the NES, and devising slogans such as "Genesis does what Nintendon't."Katz also observed that Nintendo still held most of the rights to arcade game ports for the NES, so the second part of his strategy was to work with the Japanese headquarters of Sega to pay celebrities for their naming rights for games like Pat Riley Basketball, Arnold Palmer Golf, Joe Montana Football, and Michael Jackson's Moonwalker.

Most of these games were developed by Sega's Japanese programmers, though notably, Joe Montana Football had originally been developed by Mediagenic, the new name for Activision after it had become more involved in publishing and business application development alongside games. Mediagenic had started a football game which Katz wanted to brand under Joe Montana's name, but unknown to Katz at the time, the game was only partially finished due to internal strife at Mediagenic. After the deal had been completed and Katz learned of this, he took the game to Electronic Arts. Electronic Arts had already made itself a significant force in the industry as they had been able to reverse engineer the cartridge format for both the NES and the Genesis, though Electronic Arts' CEO Trip Hawkins felt it was better for the company to develop for the Genesis. Electronic Arts used their reverse engineering knowledge as part of their negotiations with Sega to secure a freer licensing contract to develop openly on the Genesis, which proved beneficial for both companies. At the time Katz had secured Mediagenic's Joe Montana football, Electronic Arts was working on its John Madden Football series for personal computers. Electronic Arts was able to help bring Joe Montana Football, more as an arcade title compared to the strategic John Madden Football, to reality, as well as bringing John Madden Football over as a Genesis title.

The second push in 1991
The Genesis still struggled in the United States against Nintendo, and only sold about 500,000 units by mid-1990. Nintendo had released Super Mario Bros. 3 in February 1990 which further drove sales away from Sega's system. Nintendo themselves did not seem to be affected by either Sega's or NEC's entry into the console market. Sega's president Hayao Nakayama wanted the company to develop an iconic mascot character and build a game around it as one means to challenge Nintendo's own Mario mascot. Company artist Naoto Ohshima came up with the concept of Sonic the Hedgehog, a fast anthropomorphic character with an "attitude" that would appeal to teenagers and incorporating the blue color of Sega's logo, and Yuji Naka helped to develop the game Sonic the Hedgehog to showcase the character as well as the graphics and processing speed of the Genesis.The game was ready by early 1991 and launched in North America in June 1991.

Separately, Sega fired Katz and replaced him with Tom Kalinske as Sega of America's new CEO in mid-1990. Kalinske had been president of Mattel and did not have much experience in video games but recognized the razor and blades model, and developed a new strategy for Sega's push to challenge Nintendo's dominance in America with four key decisions, which included cutting the price of the Genesis from $189 to $149, and continue the same aggressive marketing campaigns to make the Genesis look "cool" over the NES and of Nintendo's upcoming Super Nintendo Entertainment System (SNES). Further, Kalinske pushed hard for American developers like Electronic Arts to create games on the Genesis that would better fit American preferences, particularly sports simulation games which the console had gained a reputation for. Finally, Kalinske insisted on making Sonic the Hedgehog the bundled game on the system following its release in June 1991, replacing Altered Beast and even offering those that had purchased a Genesis with Altered Beast a trade-in replacement for Sonic.

Under Kalinske, Sega also revamped their advertising approach, aiming for more of a young adult audience, as Nintendo still was positioning the SNES as a child-friendly console. Advertising focused on Sonic, the edgier games in the Genesis library, and its larger library of sports games which appealed to this group. Television ads for the Genesis and its games ended with the "Sega Scream" – a character shouting the name "Sega" to the camera in the final shot – which also caught on quickly.

These changes, all predating the SNES's planned North American release in September 1991, gave Sega its first gain on Nintendo in the U.S. market. Further, the price cut to $149 made the Genesis a cheaper option than the planned $199 price for the SNES led many families to purchase the Genesis instead of waiting for the SNES. The Genesis had a larger library of games for the U.S. with over 150 titles by the time the SNES launched alongside eight games, and Sega continued to push out titles that drew continuous press throughout the year, whereas with the SNES, its game library was generally held up by flagship Mario and Zelda games that only came at out once a year, along with less which further made the Genesis a more desirable option.

For Nintendo, up until 1991, they had been passive towards Sega's approach in North America, but as the SNES launch approach, the company recognized that they were losing ground. The company shifted their advertising in North America to focus on more of the advanced features of the SNES that were not present in the Genesis, such as its Mode 7 to create simulated 3D perspective effects.The initial shipment of one million SNES units sold out quickly and a total of 3.4 million SNES were sold by the end of 1991, a record for a new console launch, but the Genesis maintained strong sales against the SNES. The Genesis's resilience against the SNES led several of Nintendo's third-party developers to break their exclusive development agreements with Nintendo and seek out licenses to also develop for Genesis. Including Acclaim, Konami, Tecmo, Taito, and Capcom. The latter of which arranged to have a special licensing mechanism with Sega, allowing them to publish select titles exclusively for the Genesis.

During this period, the push for marketing by both Nintendo and Sega led to the growth of video game magazines. Nintendo had already established Nintendo Power in 1988 in part to serve as a help guide for players on its popular titles, and was able to use this further to advertise the SNES and upcoming games. Numerous other titles grew in the late 1980s and early 1990s, giving Sega the opportunity to market its games heavily in these publications.

The war escalates in 1992 and 1993
Nintendo publicly acknowledged that it knew it was no longer in the dominant position in the console market by 1992. A year into the SNES's release, the SNES's price was lowered to $149 to match the Genesis, to which Sega reduced the Genesis to $129 shortly after. The SNES was helped by Capcom's decision to maintain exclusivity of its home port of its popular brawler arcade game Street Fighter II: The World Warrior to the SNES when it was released in June 1992. While the SNES outsold the Genesis in the U.S. in 1992. the Genesis still had a larger install base. By the start of 1993, the Genesis had captured about 55% of the market, a stark contrast to 1990 when Nintendo had controlled 90% of the market.

The success of Street Fighter II both as an arcade game and as a home console title led to the growth of the fighting game genre, and numerous variations from other developers followed. Of significant interest was Midway's Mortal Kombat, released to arcades in 1992. Compared to most other fighting games at the time, Mortal Kombat was much more violent. The game showed combatants’ blood splatter during combat and allowed players to end matches in graphically intense "fatalities.” Because of its controversial style and gameplay, the game proved extremely popular in arcades.
By 1993, Both Nintendo and Sega recognized the need to have Mortal Kombat on their consoles. However, Nintendo, fearing issues with the game’s violence, licensed a “clean” version of the game from Acclaim for the SNES. Which included replacing the blood splatter with sweat and removing the aforementioned fatalities. Sega also licensed a censored version of the game for the Genesis. However, players could enter a cheat code that reverted the game back to its original arcade version. Both home versions were released in September, and approximately 6.5 million units were sold over the game’s lifetime. But the Genesis version was more popular with three to five times more sales than its SNES counterpart.

External video
video icon C-SPAN footage of the first congressional hearing on December 9, 1993.
The popularity of the home console version of Mortal Kombat, coupled with other moral panics in the early 1990s, led to concerns from parents, activists and lawmakers in the United States, leading up to the 1993 congressional hearings on video games first held in December. Led by Senators Joe Lieberman and Herb Kohl, the Senate Committees on Governmental Affairs and the Judiciary brought several of the video game industry leaders, including Howard Lincoln, vice president of Nintendo of America, and Bill White, vice president of Sega of America, to discuss the way they marketed games like Mortal Kombat and Night Trap on consoles to children. Lincoln and White accused each other's companies of creating the issue at hand. Lincoln stated that Nintendo had taken a curated approach to selecting games for their consoles, and that violent games had no place in the market. White responded that Sega purposely was targeting an older audience than Nintendo, and had created a ratings system for its games that it had been trying to encourage the rest of the industry to use; further, despite Nintendo's oversight, White pointed out that there were still many Nintendo titles that incorporated violence.With neither Lincoln nor White giving much play, Lieberman concluded the first hearing with a warning that the industry needs to come together with some means to regulate video games or else Congress would pass laws to do this for them.

By the time of the second hearing in March 1994, the industry had come together to form the Interactive Digital Software Association (today the Entertainment Software Association) and were working to establish the Entertainment Software Rating Board (ESRB), a ratings panel, which ultimately was introduced by September 1994. Despite Sega offering its ratings system as a starting point, Nintendo refused to work with that as they still saw Sega as their rival, requiring a wholly new system to be created. The ESRB eventually established a form modelled off the Motion Picture Association of America (MPAA)'s rating system for film, and the committee was satisfied with the proposed system and allowed the video game industry to continue without further regulations.

The arrival of Sony and the end of the war

The Sega Saturn (top) and Nintendo 64 (middle) struggled against Sony's newcomer, the PlayStation, which ultimately ended Sega and Nintendo's console war.
In 1994 and 1995, there was a contraction in the video game industry, with NPD Group reporting a 17% and 19% year-to-year drop in revenue. While Sega had been outperforming Nintendo in 1993, it still carried corporate debt while Nintendo remained debt-free from having a more dominant position in the worldwide market, even beating Sega in the North American and US market winning the 16 bit console war. To continue to fight Nintendo, Sega's next console was the Sega Saturn, first released in November 1994 in Japan. It brought in technology used by Sega's arcade games that used 3d polygonal graphics, and launch titles featured home versions of these arcade games including Virtua Fighter. While Virtua Fighter was not a pack-in game, sales of the title were nearly 1:1 with the console in Japan. Sega, recognizing that they had numerous consoles with disparate games they were now trying to support, decided to put most of their attention onto the Saturn line going forward, dropping support for the Genesis despite its sales still being strong in the United States at the time.

At the same time, a new competitor in the console marketplace emerged, Sony Computer Entertainment, with the introduction of the PlayStation in December 1994. Sega, aware of Sony's potential competition in Japan, made sure to have enough Saturns ready for sale on the day the PlayStation first shipped as to overwhelm Sony's offering.

Both Sega and Sony turned to move these units to the North American market. With the formation of the ISDA, a new North American tradeshow, the Electronic Entertainment Expo (E3) was created in 1995 to focus on video games, to distinguish it from the Consumer Electronics Show (CES), which covered all home electronics. Nintendo, Sega and Sony gave their full support to E3 in 1995. Sega believed they had the stronger position going into E3 over Sony, as gaming publications, comparing the Saturn to the PlayStation, rated the Saturn as the better system. At the first E3 in May 1995, Sega's Kalinske premiered the North American version of the Saturn, announced its various features and its selling price of $399, and said that while it would officially launch that same day, they had already sent a number of systems to selected vendors for sale. Sony's Olaf Olafsson of Sony Electronic Publishing began to cover the PlayStation features, then invited Steve Race, president of Sony Computer Entertainment America to the stage. Race stated the launch price of the PlayStation, "$299", and then left to "thunderous applause". The surprise price cut caught Sega off-guard, and, in addition to several stores pulling Sega from their lineup due to being shunned from early Saturn sales, the higher price point made it more difficult for them to sell the system. When the PlayStation officially launched in the United States in September 1995, its sales over the first two days exceeded what the Saturn had sold over the prior five months. Because Sega had invested heavily on Saturn into the future, Sony's competition drastically hurt the company's finances.

In the case of Nintendo, they bypassed the 32-bit CPU and instead their next offering was the Nintendo 64, a 64-bit CPU console first released in June 1996. While this gave them powerful capabilities such as 3D graphics to keep up and surpass those on the Saturn and PlayStation, it was still a cartridge-based system limiting how much information could be stored for each game. This decision ultimately cost them Square Soft who moved their popular Final Fantasy series over to the PlayStation line to take advantage of the larger space on optical media. The first PlayStation game in the series, Final Fantasy VII, drove sales of the PlayStation, further weakening Nintendo's position and driving Sega further out of the market.

By this point, the console war between Nintendo and Sega had evaporated, with both companies now facing Sony as their rival. Sega made one more console, the Dreamcast, which had a number of innovative features including a built-in modem for online connectivity, but the console's lifespan was short-lived in part due to the success of Sony's next product, the PlayStation 2, one of the best-selling home consoles of all time. Sega left the home console hardware business in 2001 to focus on software development and licensing. Nintendo remains a key player in the home console business, but more recently has taken a "blue ocean strategy" approach to avoid competing directly with Sony or Microsoft on a feature-for-feature basis with consoles like the Wii, Nintendo DS, and Nintendo Switch.

The Sega/Nintendo console war is the subject of the non-fiction novel Console Wars by Blake Harris in 2014, as well as a film adaption/documentary of the book in 2020.

Sega and Nintendo have since collaborated on various software titles. Sega has developed a biennial Mario & Sonic at the Olympics series of sports games based on the Summer and Winter Olympics since 2008 featuring characters from both the Super Mario and Sonic series, while Nintendo has developed the Super Smash Bros. crossover fighter series for numerous Nintendo properties that has included Sonic as a playable character along with other Sonic characters in supporting roles since Super Smash Bros. Brawl.

1990s handheld consoles.
A number of major handheld consoles were released on the market within about a year of each other: Nintendo's Game Boy, Sega's Game Gear, and the Atari Lynx. While the Game Boy used a monochromatic display, both the Game Gear and Lynx had colour displays. As these handheld releases were alongside the Sega v. Nintendo console war, they were also subject to heavy marketing and advertising to try to draw consumersHowever, the Game Boy ultimately won out in this battle, selling over 118 million units over its lifetime (including its future revisions) compared to 10 million for the Game Gear and 3 million for the Lynx. The Game Boy initially sold for $50 or more cheaper than its competitors, and had a larger library of games, including what is considered the handheld's killer app, Tetris, that drew non-gamers to purchase the handheld to play it.

The Hyperdimension Neptunia series of video games started as a parody of the console wars, incorporating personified consoles, developers, consumers, and other such figures within the gaming industry.