To this day, many people blame Atari’s ET as to why video gaming crashed. Despite its notoriety, ET was nothing more than just the hammer that drove the final nail into the coffin. So, what was the real reason as to why the gaming crashed? It was because of over-saturation. Try to imagine let’s say that only 4,000,000 American households have an Atari 2600, and the game companies made 8,000,000 copies of ET or Pac-Man. Even if you sell 2,000,000, the fact that you still have 6,000,000 left on store shelves isn’t going to make any return profits, which explains why over-saturation led to the crash.

In addition to overproducing games, after Activision won a court case that allowed them to be the first ever third party company, many other companies were coming out of the woodworks. Since they weren’t seasoned veterans like the founders of Activision, their games were awful but were being sold as $5 bundles. As a result of this, non-existent quality control became another major contribution for the crash.

When Nintendo entered the North American market, they learned from these mistakes by making sure whoever made a game for the original Nintendo console got their official seal of approval for quality, and that third party contracts only limited them to five games per year. To this day, Nintendo has a notorious reputation for having initial shortages and this is a sign that shows that by underproducing, not only will they not over-saturate, they can create more demand to make appropriate profits.

One thing to keep in mind with the video game crash, it was exclusive to North America. The industry was still prospering in Japan, and different regions just have different tastes and business practices. For example, the Xbox console series has been a big success with North Americans thanks to the Microsoft name and providing games that cater to American tastes. However, all incarnations of the Xbox have been a colossal failure in Japan.

There are some culture differences as to why Xbox failed in Japan before it could even launch there. It dates back to when Gates did a keynote speech in Japan back in 2001 at a convention. Though Americans would think he gave a great presentation, the Japanese didn’t think so. John Greiner, a veteran localizer for gaming, shared that Gates’ speech isn’t the way you should present yourself when doing business in Japan. Apparently, Gates was tasked to talk about the industry as a whole and how Japan’s role, but used this platform to promote the Xbox. Of course, in an American point of view, that’s what he’s supposed to do, but to the Japanese, it was seen as arrogant and turned off a lot of developers.

In addition, the Xbox has roots with PC gaming, which was never really mainstream in Japan, and the Xbox’s design as a whole was just a turn off to Japanese consumers. The “X” is considered negative in Japan because “X,” or “batsu,” is akin to being wrong in Japanese culture, and the size of the console wouldn’t accommodate Japanese homes. However, the reverse is also true with the Sega Saturn. The Saturn was an epic failure in North America, but it was a huge success in Japan. Much of the library for the Saturn appealed to Japanese gamers and stayed exclusive to that region. Its North American launch was rushed due to the upcoming North American PlayStation release, and the Saturn launched at $400 without any quality games for prospective buyers to purchase, and most gamers had to import the games.

Just because a console or platform fails in one regions and succeeds in another, doesn’t mean that the industry as a whole is going to crash. However, it shows that poor marketing depending on your target audience shows that it could lead to a crash somewhere, and Saturn’s failure in the US paved way for SEGA to leave the console market, but there were many reasons as to why they did. Due to selling their consoles (most notably the Genesis and the Dreamcast) at a low cost for American consumers, they couldn’t make any return profits despite modest sales. So in some cases, trying to sell something at a low price (at least how a consumer would appreciate it) may guarantee sales but they don’t always equal return profits.