Japanese Developers Enter the Arcade 

1966 saw Japanese multinational Sega Enterprises, Ltd., an importer of coin-operated machines, manufacture their first game, an electro-mechanical machine called Periscope. It was one of the earliest light-gun shooters and submarine simulators, using plastic waves and lights to simulate ships sinking from a submarine attack. Becoming an instant success in Japan, Europe, and North America, it set the U.S. cost of admission to a quarter per play, a standard that would remain in place for years to come. However, the success had caught Sega off-guard. Once a second-hand importer of coin-operated amusement machines, Sega would now begin manufacturing eight to ten new arcade games a year. Industry attention was drawn to Periscope’s financial performance in locations which typically never had coin-operated machines, such as malls and department stores. A watershed in the industry, Periscope's most vital influence was in turning American distributors away from traditional Chicago manufacturers and towards the Japanese masters who would come to elevate the medium.

Another Japanese importer, the Taito Trading Company, began manufacturing electro-mechanical games in the 1960s. In 1967, Taito rivaled Sega's ambitions by releasing an electro-mechanical arcade game of their own, Crown Soccer Special. The success of Crown Soccer Special and Taito’s subsequent games showed that Sega’s success was not isolated. Designers in Japan could and would put out work that could compete in the then-American-dominated field. 

True to their reputation at the time, Sega was not one to stand idle and let others hog the glory. They produced newer gun games that would anticipate what we know as the first-person shooter. Demands of the genre inspired Sega to innovate, and its machines could simulate animation on cabinet screens with rear image projection, like the ancient zoetrope. Released in 1969, the light-gun game Duck Hunt was the first in a long line that would turn Sega into one of the major players in the arcade industry. Duck Hunt’s innovations included targets that moved on a screen, the player's score printed out on a ticket, and sound effects with adjustable volume. Later that year, Sega released an electro-mechanical arcade racing game calledGrand Prix, and a vehicle-combat simulation with a shooting mechanic, called Missile. The former included a dashboard with a racing wheel affixed to the arcade, an accelerator pedal to enhance its first-person perspective, and a forward-scrolling road that was projected on a screen. The latter featured the first instance of a joystick with a fire button, and a film strip was installed, representing targets on a projection screen, which moved to simulate the feeling of motion. Then, in 1970, Sega released Jet Rocket, the first 3D combat flight simulator, the earliest first-person shooter, the first open-world game, and the first action-adventure game all in a singular  cabinet designed to simulate cockpit controls. Yet, despite these advances in technology, these electromechanical games never captured the public's imagination like pinball machines. But that was all about to change. These primitive machines had laid the design foundations for an industry to come.

The Genesis of the Electronic Video Game Arcade Industry

Video games would step into a market that was already well-established, and firmly rooted in the Americana of small-town bars and big city fast food joints. In 1971, students at Stanford University set up the PDP-11 for Galaxy Game. It was a coin-operated clone of Spacewar!, a space combat video game developed back in 1962 at MIT. Significantly, this installment would mark the first instance of a coin-operated video game, but its introduction into the American arcade would have to wait. 

Later that same year, Syzygy Engineering, a small engineering firm unofficially founded by Nolan Bushnell and Ted Dabney, developed the first commercially available video game, Computer Space, for Nutting Associates. Another Spacewar! derivative, Bushnell had seen the video game for the first time at the University of Utah in 1966 and was enamored by it. However, Computer Space tanked upon release. Nutting reported that they had produced 2,300 units but had only sold 750. Feeling that the game was simply too complex for the average consumer, Bushnell started looking for more straightforward ideas and seeking other partners. He approached pinball game manufacturer Bally Manufacturing, who indicated an interest in funding future efforts in arcade games by Bushnell and Dabney, so long as Nutting Associates were not involved. The two quit Nutting and established offices for Syzygy in Sunnyvale. Bally offered them $4,000 monthly for the next six months to design a new video game and pinball machine. With funding secured, Al Alcorn was hired as their first design engineer, and the three would set about working on their first commercially released arcade game. Initially wanting to start Syzygy off with a driving game, Bushnell had concerns that the project would've needed to be simpler for the young Alcorn's first game.  Luckily, earlier that year, in May 1972, Bushnell had seen a demonstration of the Magnavox Odyssey. It was the first commercial home console, and it happened to include a tennis game. Bushnell decided to have Alcorn produce an arcade version of the Odyssey's Tennis game, and Alcorn delivered.

Knowing that they had an instant success on their hands, Bushnell and Dabney incorporated their firm in anticipation of offering the game to Bally as part of the contract. However, Syzygy, an astronomical term, was the name of a firm that operated in California. Bushnell then wrote down several words from the board game Go, eventually settling on a term that referred to a stone or group of stones in imminent danger of being taken over by one's opponent. And so on June 27, 1972, a company by the name of Atari was first incorporated in the state of California. Unbeknownst to anyone but Bushnell, Dabney, and Alcorn, the arcade market would ironically soon find itself in imminent danger of being taken over with the release of Atari's first product, Pong.

The Rise of the Electronic Video Game

In November 1972, Atari, Inc. released Pong, the first video game to experience commercial success. Virtually overnight, Atari created the coin-operated electronic video game industry. With Pong proving immensely popular, the 1970s witnessed the gradual demise of electro-mechanical arcade games, but imitators released by competitors would prevent  Atari from dominating the fledgling market. One success, however, was not enough to create a sustainable industry. Innovation would be needed to open up the space to the infinite possibilities that video games offered, and it would come in the form of a fresh-out-of-college engineering graduate at Tokyo Denki University. 

In 1968, Tomohiro Nishikado joined the Taito Trading Company (renamed Taito Corporation in 1972), and immediately proved instrumental in their transition to video games and to the breakout of the medium into the mainstream. Presciently, management believed that transistor-transistor logic (TTL) technology would play a significant role in the future of the arcade industry, andince Nishikado was the sole employee who could work with integrated circuit (IC) technology and one of the few engineers at Japanese coin-op companies with significant expertise in solid-state electronics, he was tasked with investigating TTL technology. Six months spent dissecting Atari's Pong arcade unit allowed Nishikado to learn the workings of its IC chips, and he began modifying the game independently. November 1973’s successive releases of Soccer and Davis Cup, two sports video games in the vein of Pong, were the product of this tinkering. This spurred the development of a string of original hits with groundbreaking innovation by Nishikado, starting with TV Basketball. The gameplay was similar to earlier ball-and-paddle games, but by rearranging the shapes to resemble objects, Nishikado broke new design ground by having character sprites represent humans. Nishikado’s Speed Race saw the introduction of scrolling sprite graphics and the beloved racing wheel controller, and Western Gun was the first video game to depict human-to-human combat, a gameplay and narrative feature that would be developed in the decades to come to become one of the industry’s most popular and controversial elements. Gun Fight, Midway Manufacturing’s North American port of Western Gun, would become the first video game to use a microprocessor instead of TTL, and the improved graphics and smoother animation convinced Nishikado to leverage the power of microprocessors for his subsequent games. 

However, what is most significant about this period is Midway Manufacturing's licensing of TV Basketball. This would go down in history as the first foreign video game license for release in North America, firmly establishing the presence of Japanese developers in the American gaming markets. However, even with the massive popularity of Pong and the successes of Japanese imports that elevated the art form, electronic video games still required dedicated venues, which proved financially unviable. Instead, these electronic game cabinets stood idly by in bars, restaurants, bowling alleys, and gas stations, craving a hub that a community could gather around. That all changed with the 1978 release of Nishikado’s greatest accomplishment, Space Invaders. 

Becoming the template of the shoot 'em up genre, Space Invaders influenced nearly all shooters that came after. It was the first bona-fide blockbuster in the arcade world, single-handedly propelling video gaming into the mainstream. Infamously, rumors of a national coin shortage in its native Japan would follow, and pop culture would never be the same. The following year saw the releases of similarly successful shooters such as Namco's Galaxian in RGB color and Atari's Asteroids, a significant hit in the United States, becoming the best-selling game of the company that started it all. By the end of 1979, video game arcades appeared across North America, Japan, and Europe. What was happening was clear.

The Golden Age had begun.

The Golden Age of Arcade Games

Space shooters now dominated the space. Space Invaders, Galaxian, and Asteroids were ubiquitous. Trailing behind were racing games and derivatives of Pong. To capitalize on the medium’s popularity, chains such as Dave and Busters, Ground Round, ShowBiz Pizza Place, Gatti's Pizza, and Chuck E. Cheese's would combine restaurants and bars with the arcade during the late 1970s and 1980s. 

Until now, Namco, a bit player in the industry, was mainly known for holding the exclusive distribution license for Atari games in Japan. Masaya Nakamura, the founder of Namco, quickly hired several software engineers to develop their own video games, hoping to enter the market formally. Their first video game, Toru Iwatani's Gee Bee, landed with a resounding thud, but his third creation would immortalize him and Namco in entertainment history. 

Despite an initial lukewarm response, Iwatani's Pac-Man became so influential that it created the maze chase genre, opened gaming up to female audiences, and introduced cutscenes and power-ups to a game designer's arsenal. Its titular hero became the gaming industry’s first mascot, and the unprecedented hype around the game would even have its own name: Pac-Man Fever. 

Fueled by the previous year's release of the colorful and appealing Pac-Man, the audience for arcade games in 1981 flourished , building on the existing momentum. Williams Electronics released Defender, a more challenging shoot-em-up space game with a control configuration of five buttons and a joystick.. It wasn't the first game to scroll horizontally, but it created the genre of purely horizontal-scrolling shooters. Atari then released Tempest, the first color vector arcade game, using their Color-QuadraScan vector display tech. Tempest would also bethe first game to allow players to choose a starting level - or "SkillStep", as it was marketed - which made it one of the first to utilize a progressive level design where levels were more difficult based on prior performance.

Until now, a Japanese console developer named Nintendo had failed to break into the North American video game market, leaving the company with many unsold arcade units and on the verge of financial collapse. To keep the company afloat, the then-president of Nintendo ,Hiroshi Yamauchi, tasked Shigeru Miyamoto with converting all Radar Scope units that had yet to be sold into a new arcade game. Drawing from influences as varied as Popeye to King Kong, Miyamoto would create the scenario and design the game. New narrative ground was broken during development by using graphics for characterization, cutscenes to advance the game's plot, and multiple stages for progression. And, in 1981, Nintendo finally had its first success in the space with Donkey Kong, a game that defined the platformer. Nicknamed “Jumpman” at the time, its protagonist Mario was introduced to the video game world and, in the process, launched an icon, helping to pave the way for Nintendo’s later entry into the American console market with the NES. 

Not one to be topped, Namco released Galaga, the sequel to one of the most successful titles from the golden age, Galaxian. Konami released Scramble, the first side-scrolling shooter with forced scrolling and multiple distinct levels, and Frogger, a popular arcade action game noted for its novel gameplay notable at the time for being free of fighting and shooting. 1982 continued the momentum with Williams Electronics' release of Joust, popularizing the concept of cooperative play, and Namco's Pole Position established the genre conventions of 3D racers. To keep up with the hype, 1983 saw an increased focus on innovation. Sega's Astron Belt had been unveiled at the 1982 AMOA show in Chicago, infecting the industry with laserdisc fever. The release in Japan the following year marked the first commercial release of a laserdisc game in the region. However, luck was not on its side with the  American release. Delays from numerous hardware and software bugs allowed one of the video games it inspired to beat it to public release in the United States.

Dragon's Lair, the first video game to use cel-animated video instead of computer-generated graphics, was advertised as the first genuinely 3D video game, and the intersection of video games and animated films. Games of the era usually represented characters as a sprite, a series of pixels displayed in succession. Due to hardware limitations, the resolution, framerate, and number of frames were severely constrained, and the artists working within these confines were restricted. The LaserDisc’s storage potential allowed Dragon's Lair to overcome prior limitations with the drawback of imposing other limitations on gameplay by limiting it to an animated choose-your-own-adventure game. At the time, the industry was experiencing a downturn, and Dragon's Lair initially represented high hopes for its future. First, in the line of LaserDisc video games that flooded the market, it cost an unprecedented 50 cents per play, but what concerned operators was that players would figure out its unique predefined gameplay. Fears initially proved unfounded. By the end of 1983, premier gaming magazines rated it as the number one arcade game in America, and the arcade industry recognized it for helping turn around its 1983 financial slump. It was popular enough that computer graphics were now considered rather basic compared to Dragon’s Lair’s top-quality animation handled by the legendary animator Don Bluth and his team. By mid-1984, however, after Space Ace and other similar titles were released to little success, sentiment on Dragon's Lair's position in the industry had shifted. Due to the priciness of a game that would inevitably lose popularity among arcade patrons, the industry started to cite it as a failure after Atari successfully brought the beloved Star Wars franchise to the arcades in 1983.

Beat’em Ups 

With only a handful of popular successes still considered playable after the industry’s rapid pace of innovation, copies of popular games now saturated arcades, resulting in a decline in revenue. Despite this, arcades would remain relatively commonplace through the early 1990s as new genres were sexplored. Now,  the industry's survival would come to rely on emerging subgenres, inspired by an unlikely source. 

In 1986, Technos Japan released the seminal Renegade, codifying the martial arts-inspired combat, urbanized setting, and criminal underworld revenge themes of the new genre on the scene - the beat 'em up. However, it was the spiritual and technological successor to Renegade which landed Technos the massive hit they sought, bringing the genre to the forefront of arcade subculture. Because one martial artist wasn't enough to usher in this new era, it needed two, and they would come to be known as the Double Dragons. 

Released in 1987, Double Dragon introduced what would come to be considered as indispensable mechanics in the genre; cooperative gameplay and the ability to to arm the player character with enemy weapons. With Double Dragon's success, arcades experienced a minor resurgence, which would coincide with the Belle Époque of beat 'em up games, a genre that would peak in popularity with Final Fight two years later. However, as sprites became more detailed, this kind of violent, combat-heavy, mature content targeting underage audiences inevitably came to the  attention of parents all over America. 

The release of Williams Electronics' NARC and NAMCO’s Splatterhouse in 1988 would go down in video game history for infamously setting in motion the industry’s tendency to push the boundaries of acceptable material sold to mass audiences. NARC was the first commercially released game to utilize a 32-bit processor. However, it’s more remembered as one of the first ultra-violent video games. Splatterhouse, true to its name, was a frequent target of parental lobby against the arcade industry, and it ultimately eclipsed NARC in both its gore and its questionable choices for enemies. The TurboGrafx-16 port of Splatterhouse even printed the first parental advisory warning on the front of the box: "The horrifying theme of this game may be inappropriate for young children... and cowards." Fortunately for Namco, the relative obscurity of Splatterhouse spared the port and its sequels from the crosshairs of the infamous early 90s moral panic spawned by the likes of Mortal Kombat and Night Trap,  would continue to dog the industry long after.  

The Fighting Genre & Competitive Gaming 

After another relative decline, U.S. arcade video game revenues had maintained their downward trajectory. By that time, the sales of arcade machines had declined, with a measly 4,000 unit sales being considered a hit. However, the early 1990s saw a final resurgence with the 1991 release of Capcom's landmark Street Fighter II, which refined and popularized many of the nascent fighting game genre’s conventions. Subsequently, fighting games became the preeminent genre of arcade gaming in the early to mid-1990s, and competitive fighting games suddenly became all the rage, reviving a crippled industry to a popularity not seen since the heydays of Pac-Man fever. Now, the arcade's main drawing points were tournaments and other face-to-face competitions, and competitive players now spent hours practicing there, spending lavishly on games to train. Ironically, beat ‘em up and fighting games became the backbone of an industry, initially criticized for drawing audiences away from physical activity, only to be credited with kickstarting a whole new type of sporting competition: e-sports. 

The Sega Model 1 then popularized 3D polygonal graphics with the games Virtua Racing (1992) and Virtua Fighter (1993), bringing the genres that now made up the industry backbone to the third dimension. Gaining traction alongside fighting games were racing games like Ridge Racer (1993) and Daytona USA (1994) and light-gun shooters like Sega's Virtua Cop (1994) and Mesa Logic's Area 51 (1995), which helped diversify a scene dominated by sprites hurling fists at each other. Even with increased competition from gaming consoles, many of the best-selling titles of the early 1990s on each of the major platforms were arcade ports. What kept the arcade industry competitive during this period was that the fidelity of these ports could never match the dedicated hardware installed into the arcade cabinet. Yet, with the inevitable trajectory of improving hardware capacity, casual convenience was bound to prevail.

The End of the American Arcade

The mid-1990s introduced the fifth generation of home consoles. The Sega Saturn, the PlayStation, and the Nintendo 64 were rolled out individually, each offering improved sound, higher-pixel 2D graphics, and authentic 3D. In 1995, even personal computers, undoubtedly the weakest in processing power compared to the three major gaming platforms, followed suit by offering 3D accelerator cards. Although the Sega Model 3 used for arcade cabinets and its ilk were in another league, their lauded use of the latest graphics and sound chips slowly grew irrelevant. Inevitably, even gaps in the release dates and quality between console ports and their arcade counterparts narrowed dramatically, setting up home consoles as a major competitor with the arcades. 

Released in 1998, Sega's sixth-generation console, Dreamcast, produced 3D graphics comparable to the Sega NAOMI, the arcade system that was released by Sega that same year. Initially, Sega sought to build more powerful arcade systems, such as 1999's Sega NAOMI Multiboard, Sega Hikaru, and the 2000's Sega NAOMI 2. However, they would eventually seize manufacturing expensive proprietary arcade system boards altogether, with their later boards modeled instead on more affordable commercial console or P.C. components. 

The social atmosphere provided solely by arcades was the industry’s last competitive advantage. But, once online networking took off, it replaced the American arcade as the go-to venue of competitive games. Not only was competing online more convenient, the arcade industry fell victim to the lack of diversity in the genre of games it was putting out, even compared to other gaming markets, leading to an atmosphere of uniformity. Declining revenues discouraged further experimentation with the presentation of cabinets and the unique gameplay they could offer, which would’ve been the last competitive edge the industry could have leaned on. During a period of unprecedented creativity and innovation in the console market, the monotonous environment around the American arcade alienated new players and developers from entering the scene. 

Gamers were given a choice between a handful of matches at the arcade or renting the game for their console or P.C. The punishing logic made the choice for them. By the late 1990s, the popularity of arcade video games was declining for the final time, prompting the exit of the last remaining major players in the industry. Without cutting-edge content, arcades, once a fixture of American life, could no longer draw in the crowds they once gathered. The writing on the wall was clear. No longer were American arcades at the forefront of the gaming experience; they weren't even worth going to anymore.