1977 saw the first video game crash which caused a huge quantity of video game companies and their consoles to go bust. This was largely due to the excessive number of less-capable consoles and Pong duplicates being sold without profit; thus causing a glut to appear in the market. The release of Taito's space invaders in 1978 essentially ended the crash with its resounding success and thrusted the video games industry into its golden era.
Video game arcade cabinets could now be found outside the arcades, in shopping malls, eating establishments and other areas. Other popular games by rivalling companies started to appear like Namco's Galaga and Pac-man. Sales of arcade cabinets increased dramatically with revenue in North America reaching $2.8 billion by 1980. The video game industry even managed to surpass Hollywood and the music industry by 1981 and more game consoles were begining to appear in homes.
Second-generation consoles, such as the Colceco Telstar and the Mattel Intellivision were being released. While both were successful products they failed to out-sell their main competetor: the Atari 2600. I personally believe that Atari had a more desirable line-up of games and the controller was superior to the other two consoles' controllers. The Intellivison featured a strange numeric keypad that wasn't particularly easy to control and the Telstar didn't feature a controller at all but an interface built directly into the console making it even less practical. The Atari's controller revolutionised gaming with its brilliant joystick controller which has survived in variations to this day.
Then Atari went on to produce to produce their next console to compete with the ColecoVision: The Atari 5200 which featured improved hardware and new range of games. However the console suffered from one fatal flaw: The controller was unresponssive and completely impracticle. Its size and appearance was also highly unapealing and ironicly, the 2600 continued to outsell the 5200.
The video game industry was booming until the arrival of the personal computer which not only catered to video gaming but also marketed itself as a proffesional business machine unlike the numerous video game consoles designed for a specific function. This meant more households were purchasing computers rather than consoles. Another area in which video game companies failed is in correct copyrighting protocals, meaning 3rd party companies could produce games for the Atari 2600 without Atari receiving any of the profit. The assembly of 3rd party game programmers was brought about by the lack of recognition they received from video game companies. They had fixed salaries, regardless of how well their games sold and were denied proper acrediting. The first 3rd party company in the video game industry was Activision.
The above and the fact that numerous companies, even businesses that wouldn't be remotely associated with gaming like Quaker Oats, began producing games. This flooded the market with games and consoles. Furthermore, Atari began to lose it's standards and began producing lacking games such as the Atari's version of Pac-Man which featured glitchy gameplay and disapointing graphics. However, the last straw which irrevocably broke the gaming industry was Atari's E.T. Not only did they pay Steven Speilberg in excess of $25 million for the rights to produce the game but they only allowed for 6 weeks to produce and ship the game. The game did not sell, and they were left with 5 million unsold copies. Not only were Atari producing poor quality games, but they insisted on selling them at full price. This caused consumers to start purchasing cheaper games from 3rd party companies. Atari gained only 15% growth in 1982, but had promised as much as 50% to share holders. This led Atari's stocks to crash and led to the great crash of 1983.
It would seem that the video game industry was dead, but a Japanese company called Nintendo decided to try and market their console, the Famicon to the western audience. In 1986 they released the Nintendo Entertainment System and it became an instant success. Nintendo analysed the market and ensured they didn't repeat previous mistakes made by the industry. For one, they produced a special lock-in chip that would only allow games endorsed or aproved by Nintendo to run on their system. Not only did this mean that they could regulate what games appeared on the NES, ensuring quality but it also allowed them to receive a sum of the profits from games produced by 3rd party companies.
A select few other companies rose up and took Nintendo's cue such as Sega and their console, the Genesis. This started what was reffered to as "the cosole wars" with both companies producing, not only quality games, but a wide variety of gamestyles. No longer were video games confined to tennis simulations or the countless space-themed shooting games but a whole range of different genres began to appear. Action adventure games and role-playing games were only 2 of many new genres that oppened up. The concept of producing quality games on a select few consoles in the industry became a staple and continued over to modern gaming and consoles.
Another area in which Nintendo took the reigns was of the hand-held video game console. The Gameboy was released in 1989 and was a world-wide phonomenon; never before were gamers able to take their gaming experience on the go. Sega took its cue and released the Sega Game Gear, a similar handheld showcasing its own line of games.
In 1992 Nintendo released the Super Nintendo Entertainment System and Sega released the Sega Megadrive. Both consoles boasted 16-bit graphics capabilities and a higher standard for video games. Each companies mascots and their games: Mario and Sonic both became flagships for their respective consoles and were hailed as some of the greatest games in the history of video games.
At this point Atari was was being pushed into the background; the Atari 2600 had become obsolete and the Atari 5200 failed to impress. They released the Atari Lynx soon after the Gameboy and Gamegear was released and failed to sell as well as the competition. Being more expensive and offering a less exciting library of games saw its downfall. In 1993 Atari relased the Jaguar in attempt to overtake the competition. Atari relied on the fact that their console was 64-bit - essentially 4 time the graphical capabilities of the competition - and even went as far as to slander Nintendo in their adverts. The console was a huge failure due to the lack of quality flagship titles, 3rd party support and games that were poorly developed. At this point Atari ceased to produce consoles and later re-appeared as a 3rd party developer.
In 1994 Sega released the Saturn: A 32-bit console that used CD-based games as aposed to the more expensive cartridges it used in its previous consoles. At the time Sony also released their own console: the Playstation which also featured 32-bit processing power and a disc-based game medium. In 1996 Nintendo released the Nintendo 64 and Super Mario 64 along with it; which is recognised as the greatest evolution in 3d platforming that has shaped the way games have materialised to this day.
During the next few years notable games such as Resident Evil, Golden Eye and Legend of Zelda: Ocarina of Time were being released and boasting exciting new gameplay styles and raising the bar for video game quality. All three consoles were selling well along with their games, though Nintendo and Sony were overtaking Sega.
In 1999 Sega released what would become their final console: the Sega Dreamcast. The dreamcast sold well thanks to the support of launch titles like Soul Calibur, Sonic Adventure, Marvel vs Capcom and House of the Dead 2. This allowed the Dreamcast to enjoy success during its first year until the release of Sony's next console: the Playstation 2.