Where Were You During the Greatest Console War?

Today a walk through history. A distraction from the mania of crypto markets. Something to reminisce about, and then something new for investors to get excited about today…

Melbourne, Australia 1987. It’s Christmas time and two very eager young boys wake up to get first crack at their presents.

As four and six year olds, things are always exciting at Christmas time. There’s lots of food, lots of presents, lots of times spent with friends and family. It’s simply a wonderful time of the year.

And it’s summer so that means trips out on the boat, water-skiing, ski biscuit, knee boarding. All the things that, as a little kid, you simply live for.

But this Christmas is one of the most memorable ever. While they both have their own stocking full of gifts to unwrap, there’s something else that’s caught their attention.

It’s a single, larger present. It’s sitting on the bricks in front of the fireplace. The two stockings labelled ‘S’ and ‘B’ hang from the grate, but they don’t get a look in.

Instead both boys head for the single gift in between their raft of other presents. They know this is a present for both of them. One ‘big’ present that Mum and Dad have got them both. Something that’s going to be awesome.

As they unwrap this ‘big’ present it’s very clear this is truly the most awesome gift of all time. It might sound grand, but this is a life-changing present. Of course, their parents don’t know it at the time. But they’ve actually bought a present that will help shape both boys’ futures.

The war to end all wars

Underneath the wrapping paper exists a Nintendo Entertainment System (NES). It’s the most anticipated, revolutionary video game console ever. It’s not cheap either, retailing for just the console at $295 — roughly $700 in today’s money.

It’s by no means the first video game console. The Commodore 64 and Atari both came before. But not in this household. The NES is the first proper video game console in this family. And it’s ground-breaking.

The console hooks up to the small 10 inch CRT TV in the ‘play room’. It comes with a double-game cartridge to play; Mario Bros/Duck Hunt. You put the cartridge into the console and choose which game you want to play.

Mario Bros. is a revelation. And it consumes most of the game play. But Duck Hunt is something else again. This NES also came with the laser gun. A handheld gun that you could point at the screen to shoot the ducks flying out of the bushes in that game.

It’s revolutionary. And it captures the imagination of not just this particular 4 and 6 year old — it captures the imagination of the world.

The NES would go on to sell more than 61 million units worldwide from 1983 (when first released in Japan) through to 2003 when it was no longer available anywhere in the world.

In 2009 gaming site IGN named the NES the ‘single greatest video game console in history’. We would agree.

The NES made Nintendo the biggest video game company in the world.

And it kicked off a war. The great console war.

Hot on the heels of Nintendo was Sega with their Master System console.

Atari too started to ramp up their console development. But neither Sega nor Atari could compete with the world-dominating NES. The games catalogues ballooned, the money rolling in the doors. The world had gone video game crazy.

Not long after, in the early 90s, Nintendo upped the ante. They released the Super Nintendo Entertainment System (SNES) to the world. While the world thought the NES was incredible, the SNES took things to a whole new level. 

But again not to be outdone Sega released the MegaDrive. This was far more competitive with Nintendo because Sega now had a new hero. Nintendo had built a number of games and fans around their Mario Bros. characters. Sega now had Sonic the Hedgehog.

The SNES sold around 49 million units to Sega’s 40 million. The console wars were truly on. But they weren’t alone. By this stage others were trying to crack the lucrative video game market. Now there was a console from SNK called the Neo Geo. Phillips released the CD-i. Pioneer came out with the LaserActive. And then eventually second models of the MegaDrive, also called the Genesis.

The critical factor amongst it all was the content. The other consoles were highly capable, but they simply didn’t have the best games. That position belonged to Sega and Nintendo.

Consoles had now reached a point where the cartridges they used for games were running out of capacity. And we entered the realm of the CD-based games. And most notably the debut and rise to dominance of the Sony PlayStation.

Nintendo followed up the SNES success with the Nintendo 64. Sega released the Sega Saturn. Atari had the Jaguar. The other big console of the time was the 3DO. All were relatively successful. Nintendo sold 32.93 million Nintendo 64s.

But Sony would go on to sell 102.5 million PlayStations. The dominance of Nintendo was over. And it would take them the best part of 15 years to fight back.

Sony has dominated video game console sales through the entire 21st century so far. Microsoft’s Xbox threw down the challenge around 2002, splitting the share of the market between the two.

It pushed Sega, Atari, 3DO, pretty much everyone out of the console business altogether.  Nintendo hung on, mainly thanks to the entrenched nature of their history and the immense value of the Mario Bros. brand and characters.

Nintendo had a brief resurgence with the Wii in 2006, going on to sell over 100 million units. That alone took the company’s stock price north of JPY75,000 (AU$852.69).

But the follow up console, the WiiU, was a catastrophic failure. In fact it almost ended Nintendo. And after the highs of the Wii the stock tumbled to a measly JPY8,700 (AU$98.91).

Until the announcement of the Switch and the launch in 2017.

Back to the future

The Switch is quite possibly Nintendo’s last ditch effort to keep their console business alive. Failure would possibly mean they might never make a console again. Success…well, not many anticipated success.

But the Switch has been a godsend. In just one quarter it sold more units (14.86 million) than the previous five years selling their WiiU console (13.5 million in five years).

The stock price of Nintendo has since doubled. It’s now marching back towards their all-time highs, from around 2007. They’ve only just released the Switch and with a full console cycle (around four years) to come, they could charge even higher.

Furthermore they’re looking to bring possibly the most beloved racing game of all time, Mario Kart, to smartphones. In short, they’re finally putting into place all the vision they had before the failure of the WiiU.

They’re releasing fun, innovative add ons like Nintendo Labo for the Switch. A modern take on the kinds of accessories they built their company on all the way back in 1987 like the laser gun, the R.O.B robot and the ‘Power Glove’.

Nintendo is in the midst of a renaissance. They’ve found their mojo again. They’ve tapped into the very essence of gaming — fun, family and future. Not only are they changing the video game world again, they may very well kick off another multi-decade long console war.

It’s an incredible time for gamers — and an incredible time for Nintendo stockholders.

Sam Volkering,
Editor, Secret Crypto Network

Sam Volkering is an Editor for Money Morning and is small-cap, cryptocurrency and technology expert.

He’s not interested in boring blue chip stocks. He’s after explosive investments; companies whose shares trade for cents on the dollar, cryptocurrencies that can deliver life-changing returns. He looks for the ‘edge of the bell curve’ opportunities that are often shunned by those in the financial services industry.

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