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During the Fourth Generation, Nintendo had dominated the industry with control of 85 to 90 percent of the market on both sides of the Pacific 16. They had ruled supreme. Smaller video game companies feared and respected them, none with the clout to usurp their autocracy. This made Nintendo executives feel their company was imperishable. Concerning this, Sheff wrote,

"Nintendo ... suffered from a malaise typical of industry leaders. Fat and happy, it had been lulled into a sense of invulnerability. Yamauchi and Arakawa felt they didn't have to react to competitors simply because they were Nintendo." 16

Thus, when Nintendo's competitors began buzzing with rumors of 16-bit systems, Nintendo continued unabated in their production of 8-bit hardware. Nintendo did not believe that Sega with their 16-bit Genesis was a hazard to the NES preponderate market. While NEC was seen by Yamauchi as a potential threat, the lack of quality programmers for the TurboGraphix-16 was known to (and even somewhat orchestrated by) Nintendo. Thus, Nintendo did not feel a need to enter the 16-bit market.

Nintendo's lack of aggression cost them dearly. While the TurbGraphix-16 did in fact fail, it was not beaten out by Nintendo's fame, but by the tremendous popularity of the Sega Genesis. Sega's dream machine went on further to knock the NES out of first place the following Christmas. Long-time Nintendo licensees began to leave to pursue contracts with Sega. Subsequent injury was evident in Total Research Corp.'s annual survey of brand equity that showed Nintendo dropped from its 27th place to 103rd, while Sega had leaped from 131st to 67th.13

Irma Zandl, president of The Zandl Group, a New York-based firm that specialized in youth marketing, said in regard to this, "Sega has basically clobbered Nintendo. Sega has been much more aggressive in developing technologies [and its ads were much] more fun and really honed in on what [game players] liked."13

By mid 1991 sales of the Genesis were in excess of 1 million with cart sales ten times that, and while Nintendo of America had sold 31.7 million NES units in the United States alone, it had become evident to everyone (including Nintendo's president Hiroshi Yamauchi) that Nintendo was quickly on their way out if something was not done.15

Yamauchi had set Masayuki Uemura in charge of producing the 16-bit Nintendo, and after two years, the Super Nintendo Entertainment System (SNES) was released to the public. Continuing the belief that they were still unbeatable, despite this upstart company, Sega, Nintendo advertised the SNES, while confidently ignoring the danger of a Genesis retaliation. Twenty-five million dollars were spent on TV commercials. Gail Tilden at Nintendo Power (Nintendo of America's system exclusive propaganda machine) "hyped the SNES shamelessly."17

Initially, Nintendo's management were not the only ones confidant that the SNES would bring control of the industry back to Nintendo, many video game magazines chimed in, touting on the supremacy of the SNES.10 This was, however, short-lived.

Sega, preparing for the onslaught of its long-time rival, had discovered a flaw in the SNES hardware, the CPU speed, and had designed a game specifically to expose that flaw. Sonic the Hedgehog, Sega's new mascot, was born. The game propelled the Genesis to even greater heights, but did not kill the SNES as Sega had hoped. Instead, the market became split two ways, with dual systems having fairly equal dominance of the industry.

No longer able to control its licensees like they had in the fourth generation, Nintendo was forced into new agreements with the third party producers. While some would still buy cartridges from Nintendo (as had been done with the NES) many would wind up manufacturing their own games (although purchasing SNES security chips was still mandatory) and produce titles for both systems. Attempting to still control this new breed of licensees, Nintendo now required that each company produce three SNES titles a year that achieved a rating of at least thirty points on Nintendo's game rating system. This encouraged many companies to produce games that Nintendo executives "wanted" for their SNES.18

In spite of Nintendo being intensely competitive during the fifth generation, many mistakes on their part left their reputation tarnished. Rumors of a SNES CD system and other vaporware reduced much of the esteem for Nintendo that the consumer had during previous years. 4, 10

Ultimately, during the last few years of the fifth generation, as the industry started booming about the forthcoming sixth generation and its 32-bit hardware, Nintendo attempted one last ditch effort to reign the 16-bit market. Designers and programmers worked overtime to push the SNES beyond the established limits. An unprecedented deal was struck with Rare, a long-time contractor with the pentagon, that produced several big hit games. But none were as amazingly successful as those of the 8-bit era, and the SNES did not dominate the market as the NES had.

Today, many debate which system actually "won"* the 16-bit wars. During the final two years, the SNES had sold more systems than the Genesis (barely), but there have been far more Genesis systems purchased since 1989. Some say that because the SNES came from behind (competing with a system that had been firmly established for two years) it deserves the honor. Others say that because the Genesis (with its older technology) was able to supply heated competition to the younger SNES it should be the winner. However, if all of these arguments are considered together, it becomes evident that neither system "beat" the other, and that this era benefited greatly from the multi-system market.