The Story of Nintendo: Before Switch, How Simple Games Won Over the U.S.

Newsweek published this story under the headline of "Zip! Zap! Video Games are back!” on March 14, 1988. In light of Nintendo's release of the Nintendo Switch earlier this year, Newsweek is republishing the story.

Not long ago the home-video-game industry looked about as lively as a squashed Pac Man. After the craze of the early '80s, oversupply and poor quality control caused a sudden crash. Atari had to bury truckloads of unsold game cartridges. Now a new generation of kids has reached joystick age, the hardware and software have improved and business is taking off again. Games like Nintendo's Super Mario Bros., an improbable contest that pits workmen Mario and Luigi against supernatural baddies, are selling in the millions -- clear proof that American kids haven't lost their appetite for fun, low-brainpower entertainment. The industry's fortunes have moved as fast as the action in the best-selling games. After coming on the screen in the 1970s, the business reached a high of $ 3 billion in sales late in 1982. In 1985 the industry dropped to only abut $ 100 million. Last year sales were back at the $ 1 billion level. Nintendo has led the comeback. The Japanese company brought its first video-game players to this country in 1985. Last year Nintendo of America sold 3 million consoles designed to hook up to television sets. Nintendo and its licensees also sold 15 million game cartridges. Another Japanese firm, Sega, entered the U.S. market two years ago with machines that beat Nintendo's graphics and sound; last Christmas its American arm rang up $ 50 million in sales. Atari has bounced back into the home market. Companies like Epyx and Acclaim design games that work on other companies' machines.

American toymakers are cautiously moving to get in on the new action. After two years of flat toy profits and hundreds of layoffs, they are wary of another video crash. So they are starting slowly: Tonka has joined with Sega to market video games in the United States. Milton Bradley has entered into a software-distribution agreement with Nintendo. Milton Bradley's parent company, Hasbro, is rumored to have its own video system in the works.

Games are back on personal computers, too, thanks largely to booming PC sales. Mindscape, a software company based in Northbrook, Ill., sold more than 100,000 copies of Pac Man for the PC last December alone. It also originated Balance of Power, a fascinating world-diplomacy simulation. "The ones that do extremely well support the ones you do when you go out into left field," says CEO Roger Buoy. He says consumers go for both high- and low-end goods "the same way as you mix books . . . you read some trash and you read some great stuff."

Can another slump be avoided? Nintendo keeps quality up and inventories down with strict licensing and production controls. The company also keeps retailers happy by swapping old games for new ones so titles won't go stale on the shelf. Game designers are already looking to the future. Some are seeking out simpler forms of entertainment: Infocom, owned by Activision, is introducing a comic-book-style storytelling medium for PC's that requires hitting only a few keys to turn. Other companies like Epyx are experimenting with using VCR's with video games to improve TV-image quality. Compact-disc technology, with its huge capacity to store richly detailed pictures, could further fuel the boom.

The second challenge: to keep the games simple. Nintendo already sells an advanced computer-like machine, the Famicom, in Japan. Nintendo's latest U.S. hit, the million-unit-seller The Legend of Zelda, approaches the sophistication of PC software. Rawson Stovall, a 16-year-old syndicated columnist on video and computer games, warns against the lure of complexity. Arcane simulations requiring thick instruction manuals "aren't games to me," he says. "A game is something with action and a joystick and firing the button and shooting the aliens." For the born-again video-game industry, the key to sustaining this new boom may be not to forget that the joystick generation will always be its best market.