In 1983, Hiroshi Yamauchi, President of Nintendo, began designing a new video game system called the Famicom, which aimed at being cheaper while having better graphics and games than the competitors. One of Yamauchi’s initial moves that proved to be a smart strategy was an implementation of a security chip in the cartridge. This allowed for only Nintendo-approved games to be played on the Famicom. Atari’s failure can mainly be attributed to the mass of games being developed by numerous third parties that diluted their game library. Nintendo knew that in order to avoid this, they would have to be more particular with who made their games, and how often these games would be released.

Nintendo was able to get off to such a great start due to their smart business choices early on. They were able to get the necessary chips at the rock-bottom price of $8, due to the fact that they placed a three-million unit order. They then used their lower costs to undercut the competition with their system being priced at $100, which was significantly cheaper than its $200-$350 competitors.

Yamauchi created a business model where Nintendo’s developers would only produce one or two games per year, but would have access to large development and advertising budgets. In addition to this, the production of the cartridges was subcontracted to allow for a unit cost of $6-$8, which were then sold for around $40. The combination of these two strategies allowed for developers to create a few major hits instead of many mediocre games. What this led to, was the creation of Nintendo mascots in Mario (1985), Link (1987), and Samus (1987). These characters stuck created a brand image with Nintendo that Atari never could create with their massive and diluted game library.

Before the introduction of these mascots, Nintendo had to first break into the American market. In 1985,