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Video Games Are Back 1985-1988
1985
 |  The Nintendo Entertainment System. |
Nintendo test-markets its Nintendo Entertainment System (NES) in New York. Retailers are so skeptical about video games that Nintendo has to agree to buy back all unpurchased inventory. Armed with a large number of Nintendo-developed original titles and arcade games, the NES is a hit in a limited market release.
Atari Goes up Against Apple
Following Apple's lead in releasing the Macintosh, Tramiel's Atari mounts a challenge with the 16-bit Motorola 68000-based 520ST, internally dubbed the "Jackintosh."
Russian Conquers World With Puzzle Game
Russian programmer Alex Pajitnov designs Tetris, a simple but addicting puzzle game that can be played on PCs.
1986
Nintendo Releases the NES Nationwide
Satisfied by the system's success in New York, Nintendo markets the NES nationwide. The system debuts with Super Mario Bros., an arcade conversion, which becomes an instant hit.
|  The Sega Master System. |
Following the successful American introduction of the NES, Sega releases its Sega Master System (SMS) in the United States.
|  The Atari 7800. |
Following the success of the NES, Atari Corp reevaluates the popularity of video games and decides to release the 7800 game console.
Good Nintendo News
Nintendo outsells its competitors 10 to 1 in the United States. In Japan it unveils a disk drive peripheral for the Famicom, along with The Legend of Zelda and golf and soccer games.
Nintendo Adds New Licensees
Several companies sign on with Nintendo as third-party developers, and most of Atari's old supporters, such as Namco, are now making their best games for Nintendo's system.
1987
|  Cart-size competition. |
Nintendo's hold on the market grows, crowding out Sega and Atari. Atari releases games for the 2600, which are all but ignored by the press, and releases ports for the 7800--Namco's Galaga and Dig Dug, Williams' Robotron: 2084 and Joust, Electronic Arts' 1983 basketball game One-on-One Basketball, and Atari's own Asteroids and Centipede--that everyone has seen before. Nintendo releases The Legend of Zelda on a cartridge in the United States after deciding not to bring the expensive Famicom disk drive peripheral into the American marketplace. Games such as Kid Icarus and Metroid are released, offering enhanced NES graphics and longer quests.
Tonka Distributes Sega Games
Toy-truck company Tonka purchases the US distribution rights to the SMS and gets it into more stores than Sega did, allowing it to better compete against the NES.
|  The Atari XE. |
Atari releases the Atari XE Game System (XEGS), which is basically a repackaging its old 800 computer. The XEGS uses cartridges compatible with Atari's dying 8-bit XE computer line and includes two games (Barnyard Blaster and Flight Simulator II), a light gun, and a detachable keyboard. The unit sinks quickly.
NEC Releases "16-Bit" Console in Japan
NEC releases the PC-Engine in Japan and touts it as a 16-bit machine. Actually, the console features a 16-bit graphics processor.
1988
Atari Releases Games for the NES
Atari Games establishes Tengen, a subsidiary that produces games for home consoles. Tengen begins as a licensed third-party developer of NES-compatible games. This role ends when Atari Games takes Nintendo to court, claiming that Nintendo has an illegal monopoly on the video game industry, achieved through illegal practices, such as fixing prices and using computer-chip lockout technology to prohibit unlicensed development of NES software.
Tengen Bypasses Nintendo "Lockout" Chip
Tengen discovers a way to produce NES-compatible games without Nintendo's approval and announces that it will develop, manufacturer, and distribute NES-compatible games without Nintendo's blessing.
Coleco Files for Bankruptcy
Unable to recover from the disastrous Adam, Coleco files for bankruptcy. Most of its catalog goes to Milton Bradley and Parker Brothers.
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