System Conflict
Continued
In the early 90's Sega released the first 16-bit console, the Genesis, way ahead of Nintendo's SNES. This head start along with their killer app-Sonic the Hedgehog-gave them enough market penetration to lure third party developers from Nintendo.
At a console's launch, it has to have a killer app that will sell it-a game everyone is dying to play. They had that with Sonic. Third parties look first look at the number of consoles sold before they develop for it. Obviously more people with that console means more people who will buy their games.
Being the first to release usually means more time to gather owners that will in turn buy games. However this also means weaker hardware. This happened with the Genesis. When the SNES was released almost a year later, it had much better graphics and sound. Nintendo caught up eventually but it not enjoy the dominance it had with the NES.
Another reason for Sega's success was Nintendo's weakness: its wholesome image. The company made a huge mistake when their version of Mortal Kombat did not have blood. This continued with other games prompting older players to switch to over to Sega.
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