DOS

-97% During the video game crash, sales dropped 97% from $3.2 billion in 1982 to $100 million by 1985. Developers who saw a goldmine with the success of Atari in the late 70s rushed in to make a quick buck, quickly over saturating the market with terrible quality consoles and games. Critics were quick to label video games a fad. Like toys they believed consoles were simply part of a hype cycle. Atari famously buried thousands of ET video games. Big companies like Mattel packed up and left. So what changed? Enter Nintendo. Founded in 1889 as a trading card company, Nintendo found their way to video games initially through licensing before creating their own console, the Color TV Game Series. Effectively a knock off of the Maganavox Odyssey they had licensed. And it crushes in Japan. So what do they do? The exact opposite of the rest of the market. Rather than rush to expand outside Japan they invest in R&D with the mandate: -Build a console which is at least 1 year more technologically advanced than anything else in the market -Build it profitably for under $75 -Develop IP that people will love Nintendo knew the critics had it wrong. The problem wasn’t video games. It was the quality. They spent the next FIVE YEARS investing in R&D to hit that goal. While building the hardware they also launched a series of arcade games. Most of these were terrible. But one, Donkey Kong, would be a hit. It would not only be adapted as a launch title for the Nintendo Entertainment System (NES), but its “jump man” character would evolve into everyone’s favorite plumber, Mario. When the NES finally did launch it was a massive success. By 1989 25% of all homes in the US had one. So what am I getting at here? 1. Gold rushes lead to over saturation and natural corrections 2. Don’t confuse these corrections for quality and hype for a lack of product market fit 3. Quality takes time 4. IP is the most durable path Onward. – at Austin, TX