Third-Generation Consoles

The Third Generation Consoles (1983-1994) improved on the home console market. In Japan, Nintendo released their popular console, the Famicom, the same day as SEGA's SG-1000 in 1983. The Family Computer was re-branded in North America as the Nintendo Entertainment System. After the crash of the home console market in North America, the Nintendo Entertainment System brought gaming back to a mass audience and saved the market for video games there. In 1985, SEGA released the SG-1000 Mark III, which was re-branded as the Master System outside of Japan. The console was not popular in Japan and North America due to the immense popularity of the NES. SEGA, however, had considerable success in Europe, South America, South Korea, and Oceania, regions where the Master System either rivalled or outsold the NES.

Overview
In the history of computer and video games, the third generation (sometimes referred to as the 8-bit era) began on July 15, 1983, with the Japanese release of both the Nintendo Family Computer (later known as the Nintendo Entertainment System, or NES, in the rest of the world) and SG-1000. This generation marked the end of the North American video game crash of 1983, a shift in the dominance of home video games from the United States to Japan, and the transition from single-screen or flip-screen graphics to scrolling graphics, which was a pivotal leap in game design.

The best-selling console of this generation was the NES/Famicom (which remained the best-selling home console up until the PlayStation), followed by the SEGA Master System (which dominated the European, South American and Oceanian markets ) and then the Atari 7800. Although the previous generation of consoles had also used 8-bit processors, it was at the end of this generation that home consoles were first labeled by their "bits". This also came into fashion as 16-bit systems like the Mega Drive/Genesis were marketed to differentiate between the generations of consoles. In the United States, this generation in gaming was primarily dominated by the NES. The end of the 3rd generation of video games comes as 8-bit consoles become obsolete in graphics and processing power compared to 16-bit consoles.

History
The Family Computer (commonly abbreviated the Famicom) became very popular in Japan during this era, crowding out the other consoles in this generation. The Famicom's Western counterpart, the Nintendo Entertainment System, dominated the gaming market in Japan and North America, thanks in part to its restrictive licensing agreements with developers. This marked a shift in the dominance of home video games from the United States to Japan, to the point that Computer Gaming World described the "Nintendo craze" as a "non-event" for American video game designers as "virtually all the work to date has been done in Japan." Although the NES dominated the market in Japan and North America, SEGA's Master System made large inroads in Europe, Oceania, and Brazil, where the NES was never able to break its grip. The Atari 7800 also had a fairly successful life in the United States, and the Sharp X68000 began its niche run in Japan in 1987.

The third generation would mark the move away from single-screen or flip-screen graphics, which were more dominant in the previous generation, to scrolling graphics, which was a pivotal leap comparable to the move to 3D graphics during the fifth generation. While hardware scrolling had been present in various arcade games in the early 1980s, during the golden age of video arcade games, it did not become common in consoles until the 1983 release of the NES, establishing the dominance of scrolling games, which opened up the possibility of vast worlds that made earlier single-screen games seem quaint. This gave Nintendo's NES a major advantage over its main competitor, the SEGA SG-1000, which was released on the same day but lacked hardware scrolling. Unlike the NES, the SG-1000 initially had very little to differentiate itself from earlier consoles such as the ColecoVision and contemporary computers such as the MSX. Despite the lack of hardware scrolling, SEGA's SG-1000 Mark II was able to pull off advanced scrolling effects, including parallax scrolling in Orguss and sprite-scaling in Zoom 909. In 1985, SEGA's Master System incorporated hardware scrolling, alongside an increased colour palette, greater memory, pseudo-3D effects, and stereoscopic 3-D, gaining a clear hardware advantage over the NES. However, the NES would still continue to dominate the important North American and Japanese markets, while the Master System would gain more dominance in the emerging European, South American and Oceanian markets.

In the later part of the third generation, Nintendo also introduced the Game Boy, which almost single-handedly solidified and then proceeded to dominate the previously scattered handheld market for 15 years. While the Game Boy product line has been incrementally updated every few years, until the Game Boy Micro and Nintendo DS, and partially the Game Boy Color, all Game Boy products were backwards compatible with the original released in 1989. Since the Game Boy's release, Nintendo had dominated the handheld market. Additionally two popular 8-bit computers, the Commodore 64 and Amstrad CPC, were repackaged as the Commodore 64 Games System and GX4000 respectively, for entry in to the console market.

The third generation saw many of the first console role-playing video games (RPGs). Editing and censorship of video games was often used in localizing Japanese games to North America. During this era, many of the most famous video game franchises of all time were founded. Some examples are Super Mario Bros., Final Fantasy, The Legend of Zelda, Dragon Quest, Metroid, Mega Man, Metal Gear, Castlevania, Phantasy Star, Megami Tensei, Ninja Gaiden, and Bomberman.

The third generation also saw the dawn of the children's educational console market. Although consoles such as the VideoSmarts and ComputerSmarts systems were stripped down to very primitive input systems designed for children, their use of ROM cartridges would establish this as the standard for later such consoles. Due to their reduced capacities, these systems typically were not labeled by their "bits" and were not marketed in competition with traditional video game consoles.

Starting in 1982, several home computers were released, which were focused on playing games: the ZX Spectrum, Commodore 64 (C64) and Amstrad CPC. All thee of these were popular in Europe, with the Spectrum and C64 in particular outselling computers from Apple and IBM, and the less versatile games consoles. These three machines would later emerge in console format, as the Commodore 64 Games System and GX4000, while the Spectrum could play cartridge-based games via the ZX Microdrive, with a later addon adding CD-ROM capabilities.

Nintendo versus SEGA
The Nintendo Entertainment System and Family Computer sold by far the most units of any third generation console in North America and Asia. This was due to its earlier release, its strong lineup of first-party titles (such as Super Mario Bros. and Super Mario Bros. 3, The Legend of Zelda, and Metroid), and Nintendo's strict licensing rules that required NES titles to be exclusive to the console for two years after release. This put a damper on third party support for the other, less popular consoles. However, SEGA's Master System was more popular than the NES in Europe, South America, and Oceania, with the latter two markets being first reached by SEGA. Many more games for the Master System were released in Europe and Brazil than in North America, and the console had a very long shelf-life in Brazil and New Zealand. In Europe, competition was tough for the NES, which was not as successful as the Master System in those other regions despite the hegemony that it had in the North American and Japanese markets. The industry also started to grow in places west of the Soviet Union, including Lithuania via new programmers trained in that area. The Master System was finally discontinued in the late 1990s but has continued to sell in Brazil through to the present day, while Nintendo of Japan continued to repair Famicom systems until October 31, 2007.

Japan
The cumulative (including annual) sales figures for Japan:

United States
The cumulative (including annual) sales figures for the United States:

Western Europe
The cumulative (including annual) sales figures for Western Europe:

The regional sales figures for Western Europe: