The third generation of video game consoles was less numerous than the second, with Nintendo and Sega asserting their dominance. But there was more to this generation than Nintendo, Sega, and Atari. After the game console market came back from the dead, several other companies wanted in.
Who was in this race besides those three? While two game consoles from the second generation, the APF MP1000 and Coleco Vision, could double as home computers, in this generation, three home computers did the opposite and tried to become game consoles. If that’s news to you, I’m not surprised. The experiment didn’t go well.
Second generation versus third generation game consoles
The line between the second and third generation game consoles is admittedly fuzzy. Most of the second generation consoles released in 1982 or later could really go either direction. Many people lump the Sega SG1000 in with the third generation. I don’t, because the hardware is essentially identical to the ColecoVision. The Atari XE game system uses the same hardware as the Atari 5200. But it was released in late 1987, well into the third generation, so most people consider that a third generation console.
With subsequent generations, the difference was more tangible. That’s because they had a more dramatic change in CPU, bit depth of the graphics, resolution, and amount of memory. Both the second and third generation of game consoles used 8-bit CPUs, so the difference really came down to the graphics and sound capabilities. While both the Atari 2600 and Nintendo NES were 8-bit consoles, they absolutely feel like different generations. This is still true today. But the difference felt even more dramatic in 1986. The pixel art of the third generation looked high-tech next to the crude graphics of the early second-generation consoles. Today the pixel art is charming. And the crude Atari graphics still look crude.
Atari 7800
The Atari 7800 was supposed to hit the market in the spring of 1984. Then Warner Communications abruptly sold Atari to Commodore founder Jack Tramiel, who was really more interested in selling computers than game consoles.
The 7800 ended up not reaching the market until 1986, after Nintendo’s successful test launch.
The 7800 was backward compatible with the Atari 2600, but that was more important in 1984 than in 1986. It was a capable machine, and a big improvement over the Atari 5200, but sold 3.77 million units, good for about five percent of the market and not coming close to the success the Atari 2600 had.
Atari mostly kept pace with Sega in the US market and may have outsold them at least in some years. But they didn’t keep pace with Sega’s profits. That’s because Atari only charged $80 for the console at launch, as opposed to $200 for the Sega console.
Atari did sell more consoles than Sega from 1986 to 1992, but this was due in part to its re-release of the 2600 console in 1986.
Shortage of Atari 7800 game titles
Part of the reason for the disappointing sales was a lack of titles. It only had 59 cartridges available. In the previous generation, arcade titles from Atari, Nintendo, and Sega all ended up on the 2600. But when Tramiel bought Atari, the Atari arcade division wasn’t part of the deal, and Nintendo kept its arcade titles on its own platform in this generation. Sega didn’t keep all of its titles exclusive, but was much more eager to put its titles on computers than on a rival console. Atari used its existing licenses to make enhanced versions of older titles for the 7800. But that meant its library looked dated next to Nintendo and Sega, and the titles didn’t come out as quickly as they did on the other platforms either.
Nintendo NES
The NES was the winner of this generation, selling 60 million units to break the Atari 2600’s record and becoming a cultural icon. Released in Japan in July 1983, originally Nintendo was going to partner with Atari to release it in the United States. But the deal fell through over a disagreement over licensing rights to Donkey Kong. The failed partnership is a tantalizing might-have-been.
Instead, Nintendo released the console on its own. It made its US debut in limited test markets in October 1985. The rest of the United States got the NES in September 1986. It was released in most European markets in 1987.
Nintendo studied what went wrong at the end of the second generation and considered just about everything when it put together its list of launch titles and made it look more like a VCR than a game console. Arguably it wasn’t that much more powerful than the last of the second generation consoles had been. But its launch titles played to its strengths and turned the system into a juggernaut. It eventually ended up with a library of 1386 titles.
My own experience may not be typical, but I recorded my recollections of the NES taking hold in my small-town middle school in 1987.
Sega Master System
The Sega Master system was the second most popular system of this generation, selling 20 million units and initially outselling Nintendo in Europe and Brazil. This console was very similar to a Coleco Vision, using a graphics chip from Yamaha that was derived from the TMS 9918A used in the ColecoVision. Nothing would have stopped Coleco from putting the same Yamaha chip in its own console and making a third generation console out of it to go head to head with Sega.
The two things Sega had going for it were the enhanced graphics chip and bank-switching capability to accommodate larger cartridges with up to 512 KB of ROM space so the games could be bigger and more complex than a Colecovision. Sega also had a large catalog of arcade games it could port to its console, giving them an advantage Atari didn’t have. Its library of 317 titles was a big reason it outsold Atari.
After making its debut with the SG1000 in limited markets, the Sega Master System helped revive a dead market in North America. It didn’t win the generation, but Sega built on what it learned when it created the fourth-generation Genesis/Megadrive.
Dendy
What do you do if you are behind the iron curtain and want to play video games like the rest of the world, but you can’t because the rest of the world hasn’t figured out how to trade with your country yet? You clone the leading console, release bootleg versions of the most popular titles, and create a few titles of your own, apparently. That’s all this console was. This is a pirate Nintendo knockoff console for sale and use mostly in the former Soviet republics. And those countries, this international console of mystery is as iconic as the NES or the Famicom.
There are parallels here with the Emerson Arcadia 2001, except the Dendy was an outright copy of an existing console.
The leftovers
These last three systems really need to be considered as a group, because they all had something in common. All of them were based on established computer technologies. Exactly none of them made any dent in the market. Today it’s easy to second guess and ask what they were thinking. But there’s a reason it made sense at the time, which we’ll get to after covering the specifics of the systems.
Atari XEGS
What do you do when you’re in third place and your two competitors have access to a larger library of titles than you do? You compete with yourself, apparently.
The XE game system was a second incompatible console that Atari brought to market in this generation. It was based on the Atari 8-bit computers, so essentially the XEGS was what the Atari 5200 always should have been. But releasing it in 1987 didn’t solve any problems. The XEGS could take advantage of cartridges for the Atari 400/800 that had been around since 1979, and Atari re-issued 32 titles on cartridge for the XEGS. The problem was that much of the library felt dated.
It only sold 100,000 units during its lifetime of 1987 to 1992, so the XEGS is rare and valuable today.
Amstrad GX4000
The Atari XEGS wasn’t the only game console of this generation based on aging computer technology. Amstrad repackaged its CPC computer into a game console in late 1990.
It only sold 15,000 units, so it’s a rarity today, especially outside of the Europe. It had the same problem as Atari and Commodore, in that its existing software library was on tape or disk. That meant titles had to be re-released on cartridge for the game system version. Only 30 titles were converted. Amstrad gave up on the experiment in 1991.
Commodore 64 Game System
The Commodore 64 Game System is another oddity in this group. Released in 1990, this game system is just a Commodore 64 motherboard stuffed into a different case. It seems like a bad idea looking back. But the major Commodore magazines in the United States urged Commodore to do this to compete against Nintendo. It bordered on obsession in the pages of Compute!’s Gazette in the summer of 1989.
The problem was most of the Commodore 64 library was on disks or cassettes rather than cartridge. With only 28 titles converted, this system also flopped. In its waning years, Commodore disassembled the unsold units and rebuilt them into conventional C-64 computers to have a product to sell. An estimated 20,000 units shipped, but of those, a paltry 2,000 actually sold. That compares with 12 million units as a computer. Commodore discontinued it in 1991 without ever bringing it to the United States.
This system flopped so hard I wasn’t sure it was worth mentioning. But it does show that Atari wasn’t the only company who thought the XE GS was a good idea.
Why computers became consoles in the third generation
It seems a bit curious that after home computers contributed to the 1983 video game crash that computer makers would turn around and change their computers into game consoles.
The best explanation is that the home computer industry was changing in the late 1980s. Demand for 8-bit computers softened as sales of 16-bit computers like the Atari ST, Commodore Amiga, and Tandy 1000 and other IBM PC compatibles increased. Building a game console out of those aging computer parts seemed like a way to use up old inventory and potentially increase the platforms’ mindshare and market share. It might even lead to a resurgence in development. One could hope.
The problem with this strategy was none of these consoles came on the market early enough. Nintendo and Sega had established themselves by 1990. The consumers who remained at that point weren’t buying a console so much as they were buying into a software library. Let’s face it. Someone who was in the market for a game console December 1990 wanted to play Mario or Zelda. So they were going to buy Nintendo. If they wanted a C-64 or a CPC, it was to do something a computer could do. Atari did the best of the three because it understood the game console market a lot better and knew what it took to promote it. But winning this battle didn’t take much.
David Farquhar is a computer security professional, entrepreneur, and author. He started his career as a part-time computer technician in 1994, worked his way up to system administrator by 1997, and has specialized in vulnerability management since 2013. He invests in real estate on the side and his hobbies include O gauge trains, baseball cards, and retro computers and video games. A University of Missouri graduate, he holds CISSP and Security+ certifications. He lives in St. Louis with his family.