Third-party Licensing
Nintendo's near monopoly on the home video game market left it with a degree of influence over the industry exceeding even that of Atari during Atari's heyday in the early 1980s. Unlike Atari, which never actively courted third-party developers (and even went to court in an attempt to force Activision to cease production of Atari 2600 games), Nintendo had anticipated and encouraged the involvement of third-party software developers—but strictly on Nintendo's terms. To this end, a 10NES authentication chip was placed in every console and another was placed in every officially licensed cartridge. If the console's chip could not detect a counterpart chip inside the cartridge, the game would not load. Because Nintendo controlled the production of all cartridges, it was able to enforce strict rules on its third-party developers, which were required to sign a contract by Nintendo that would obligate these parties to develop exclusively for the system, order at least 10,000 cartridges, and only make five games per year.
Read more about this topic: Nintendo Entertainment System