1) The early history of digital entertainment began in the 1970s with simple console and arcade games like the Magnavox Odyssey, Computer Space, and Atari Pong. 2) The success of the Atari VCS in 1977 drove mainstream adoption of home consoles, though later management issues led to developer dissatisfaction and the 1979 founding of third party software houses. 3) The early 1980s saw the rise of the Intellivision and key innovations like downloadable games, but the 1983 video game crash nearly destroyed the industry due to low quality games and an oversaturation of the market.

1. An Early History of
Digital Entertainment
Associate Professor Roberto Dillon
roberto.dillon@jcu.edu.au

3. How the industry started
1972:
Magnavox
Odyssey
1971:
Computer Space
1972: Atari Pong

4. October 1977:

5. The VCS was a HUGE success
• Home consoles became mainstream
• BUT….
• Bushnell had sold Atari to Warner in 1976
– More cash was needed for funding mass scale VCS production
• Atari new (Warner appointed) management was very “old
fashioned”
– CEO Ray Kassar: “I understand creative people: I
worked with towel designers before”
– No royalties were paid
– No credits were given

6. Consequences…
• First Easter Egg (Adventure, 1979)
We are a brave knight seeking a
lost Enchanted Chalice that has
been stolen by an evil wizard…

7. Consequences…
• Defections:
• October 1, 1979:
Birth of third party software houses
(obviously Atari didn’t like it and sued Activision, but lost)

9. 1979: Intellivision: First Console War!
• General Instrument CP1610 (16-bit) CPU running at 895 kHz
• 1456 bytes of SRAM
• 160 x 96 resolution (broken into 8x8 cells)
•16 color palette, all of which can be on the screen at once
•8 sprites

10. PlayCable (1981)
• First downloadable game
service in history
• Continuously broadcasted
code through cable
channels
• Small games only:
maximum 4K per game

11. First Sport licenses & first game playing as a “bad” guy
NBA Basketball (Mattel,1979),
NFL Football,
NASL Soccer,
MLB Baseball,
NHL Hockey,
PGA Golf Dracula
(Imagic,1983)

12. First implementation of Fog of War and D&D licenses
Advance Dungeons & Dragons: Cloudy
Mountain (Mattel, 1982)
Advance Dungeons & Dragons:
Treasure of Tarmin (1983)

13. Utopia (Mattel, 1981)
Civilization (Microprose, 1991)
Melody Blaster (Mattel, 1983) Guitar Hero (Harmonix, 2005)

14. Public Perception
• Videogames more popular than ever
• Love or Hate reactions…
– Since the very beginning games were seen as
“detrimental” and bad for the youth
• 1976: Exidy releases “Death Race” in the arcades
• Drive a car to run over zombies and score points.
• Only 500 cabinets were made

17. ► 1981: In the Philippines, President Marcos
actually banned videogames, giving people two
weeks to “surrender” any videogame to the
army and police forces
► Violators faced a fine of $600 or 6 months to 12 years
in jail.
► 1982: Several small towns in the USA closed
their game arcades

18. Low Quality Games
• Everyone wanted to be a 3rd
party developer…

19. Low Quality Games
• 1982: Atari feeling invincible…
• Paid exclusive rights for consoles
• Development rushed in 6 weeks
• Installed user base: 10 million
• Units manufactured: 12 million!
• Results:
• 5 million units unsold
• 7 million unsatisfied customers

20. Low Quality Games
• 1982: Atari feeling invincible…
• Warner forced Atari to buy exclusive rights
from Spielberg for $25 million
• Rushed in 5 weeks
• 4.5 million units manufactured
• 1.5 million units sold

21. A new competition

22. 1983 Crash
• On December 7th
1982 Atari missed its overly optimistic financial
forecast (10% profit increase vs. 50%). Stock tumbled 33%. Panic
ensued.
• Video Games were officially classified as a “fad”
• Industry revenue in NA dropped from $3.2 billion to $100 million
(1985)

23. Meanwhile, in Japan…
• In 1977 Nintendo releases an Odyssey inspired console in
Japan: Color TV Game 6 and 15

24. Donkey Kong (1981)

25. Failed deals: Nintendo,
Commodore and Coleco
• 1981: Mr. Tomczyk at Commodore realizes the potential of Nintendo arcade games on home
computers. Nintendo likes the idea of expanding its market but the deal is cancelled at the
last minute by Jack Tramiel.
• 1982: Just before the Crash…
• Nintendo noted that its arcade games ran very well on ColecoVision and asked to buy
the console for 10% above production cost to sell it in Japan.
• Coleco wanted to give only a 10% discount on retail price.

26. Failed deals: Nintendo,
Commodore and Coleco
• 1983: Nintendo Famicom released in Japan…

27. 1985: A New Strategy
• Avoid direct competition with computers and differentiate it
from old systems: It’s not “just a video game”!
• Need to be presented as an innovative toy/entertainment
system for the whole family
• From “Family Computer” to “Nintendo Entertainment
System”

29. 1985: A New Strategy
• Avoid the overcrowded low quality market that
characterized the Atari 2600 days
– Developers had to ask for a license
– Nintendo manufactured the games themselves
• to include a security system and enable the game to work
– No one could publish more than 5 games per year
– Games had to be approved first

30. 1985: A New Strategy
• The strategy worked. And the NES build a terrific catalog.
• In a few years, it’s market share in North America reached 89%, leaving
competition far behind.

31. A winning strategy?
• Like Atari, now Nintendo also
felt invincible and in full control.
– And did anything it could to
maintain the status quo

32. A winning strategy?
• Developers and Publishers became more and
more unhappy with Nintendo and its strict and
controlling policy.
• This created a new opportunity…

33. • No matter how powerful, HW needs SW!
• Main CPU: Motorola 68000 running at
7.67 MHz (NTSC) or 7.61 MHz (PAL)
• Yamaha YM2612 FM synthesizer and
a Texas Instruments SN76489A PSG,
controlled by a Z80
•72kB of RAM, as well as 64 kB of video
RAM
• up to 64 colors at once from a palette of
512
(1988)(1989)

34. A new strategy!
• Offering everything Nintendo was forbidding:
– Publish as many games as needed!
– Could discuss higher royalties and even own cart
manufacture on a case by case basis
– More open to adult content

35. – Seal of quality recommended but not required

36. Lessons learnt
Sport Licenses
(Tom Kalinske: from Mattel to Sega)

37. Sonic The Hedgehog (1991)
• Needing a mascot as strong as Mario

38. Lessons learnt
• Aggressive marketing

39. Results
• SNES (released in 1991) and Genesis went
head to head till 1993

40. SEGA America vs. Japan
• Sonic: with easter egg, yet again!
Credits are hidden on the “Sonic Team Presents” screen, and completely
unseen in every region outside of Japan. If you have a Japanese
Megadrive you can use the code C, C, C, C, C, C, Up, Down, Down,
Down, Left, Right then enter Down + A + B + C to turn the screen's
background to white, making the text visible.

41. SEGA America vs. Japan
• In 1994 Sega started fragmenting its offering (32X
and Saturn), losing market share as result.

42. Sony and Nintendo
• Since 1988 Sony worked on the
audio chip for the SNES
• Agreement with Nintendo for a
SNES CD add-on
– Sony owning the rights for CD
based games
– Plus their own new SNES-clone
system, “Play Station” to play both
cd and carts
• Sony announces the
agreement at CES 1991…

43. Sony and Nintendo
• The day after, Nintendo announced a partnership
with Philips for the CD add on, publicly humiliating
Sony!
• In the end, the cd add-on didn’t happen
– In another anachronistic move, Nintendo decided
to stick to carts, further losing market share.

44. PlayStation (1994)
• CD based (cheaper, more storage than carts)
– Aggressive price policy ($299)
• Focus on 3D graphics, action and story oriented games.
• Aggressively buying existing studios
– Psygnosis
• Setting up a 3rd
party friendly environment
– 250 studios signed on day one in Japan alone

45. PlayStation (1994)
• Quickly taking over a huge share of the market.
– First console to sell more than 100 million units
– And more than 1,000 games in its catalog!
32.93 million 9.5 million
102.5 million

46. In conclusion…

47. 40 years in the video game industry feel like 4,000
years in human civilization!

48. Keep things simple (UI/UX)

49. • We need to constantly evolve to remain
competitive: can never rest on laurels!

50. • Failed deals can point us to even bigger
successes

51. Thanks for your kind attention!
roberto.dillon@jcu.edu.au