The origin of video games lies in early cathode ray tube-based missile defense systems in the late 1940s. These programs were later adapted into other simple games during the 1950s. By the late 1950s and through the 1960s, more computer games were developed (mostly on mainframe computers), gradually increasing in sophistication and complexity.[n 1] Following this period, video games diverged into different platforms: arcade, mainframe, console, personal computer and later handheld games.

The first commercially viable video game was Computer Space in 1971, which laid the foundation for a new entertainment industry in the late 1970s within the United States, Japan, and Europe. The first major crash in 1977 occurred when companies were forced to sell their older obsolete systems flooding the market.

Six years later a second, greater crash occurred. This crash—brought on largely by a flood of video games coming to the market—resulted in a total collapse of the console gaming industry worldwide, ultimately shifting dominance of the market from North America to Japan.

While the crash killed the console gaming market, the computer gaming market was largely unaffected. Subsequent generations of console video games would continue to be dominated by Japanese corporations. Though several attempts would be made by North American and European companies, fourth generation of consoles, their ventures would ultimately fail. Not until the sixth generation of video game consoles would a non-Japanese company release a commercially successful console system.

The handheld gaming market has followed a similar path with several unsuccessful attempts made by American companies all of which failed outside some limited successes in the handheld electronic games early on. Currently only Japanese companies have any major successful handheld gaming consoles, although in recent years handheld games have come to devices like cellphones and PDAs as technology continues to converge.