By Mo Mozuch

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To many people, videogames are a frivolous waste of time. Perhaps. But they're also the world's most profitable pastime: Worldwide, videogames made more than $180 billion in 2024. That's more than Hollywood, the National Football League and Netflix combined.

It all started with a simple two-player game (no, it wasn't Pong). Read on to see what really came first, and how videogames have since evolved into today's massive global industry.

It begins with 'Spacewar'

A handful of basic electronic games -- think checkers and tic-tac-toe -- were designed in laboratories going back to at least the 1950s. One that drew attention was "Tennis for Two," created by physicist William Higinbotham at the Brookhaven National Laboratory for a public exhibition in 1958. It was played on an oscilloscope, an instrument that measures and displays electrical signals.

But the progenitor of the modern videogame is widely considered to be Steve Russell's "Spacewar," designed in 1961 as an exercise in computer programming when Russell was a student at the Massachusetts Institute of Technology. It was purely programming code, unlike earlier games that could run only on modified analog machines. This allowed copies of "Spacewar" to be sent to other schools and computer labs, making this the first game with relatively wide -- though still limited -- distribution.

Running at MIT on a $120,000 computer the size of a Buick, Russell's "Spacewar" was a two-player game centered on dogfighting space rockets in flight around a sun.

The importance of 'Pong'

Videogames were first brought to the masses by two men: Ralph Baer and Nolan Bushnell. Baer designed the Magnavox Odyssey, the earliest home videogame console, developed in 1972. That same year, Bushnell's company, Atari, released "Pong." It caused a commercial and cultural sensation that created demand for the at-home arcade experience Baer had just developed.

"The establishment of Atari creating not only a coin industry, but almost immediately a home videogame industry, is the most important landmark moment in the primordial soup of early videogame history," says Frank Cifaldi, founder and director of the Video Game History Foundation.

Nintendo is a game changer

In the mid-1980s, Nintendo changed the way people thought about videogames with the Nintendo Entertainment System console. It replaced the head-to-head competition of the earliest videogames with games like "Super Mario Bros." The object was no longer to defeat an opposing player. It was to beat the computer itself through a blend of skill, repetition and luck to achieve a goal -- in the case of "Super Mario Bros.," to rescue a princess.

" 'Super Mario Bros.' wasn't trying to replicate an arcade experience at home. 'Super Mario Bros.' is a game you complete," Cifaldi says.

The Nintendo console launched dozens of similar franchises. "The Legend of Zelda," "Metroid," "Final Fantasy" and more would immerse players in heroic journeys full of epic achievements.

A technological boost

By 1987, Nintendo owned about 70% of the videogame market in the U.S. But it didn't take long for a serious competitor to emerge. The Sega Genesis console made its debut in 1989 with a technological advantage: It was a 16-bit system, giving it twice the processing power of Nintendo's 8-bit system, which allowed for better graphics and more-complex games. The taunting slogan of a 1990 Sega advertising campaign was "Genesis Does What Nintendon't."

But Nintendo soon did release its own 16-bit Super Nintendo console, and as the '90s wore on, Sega and Nintendo launched more new consoles. Nintendo won that competition in the end, while Sega saw itself edged out of the market by Sony's PlayStation. This relentless upgrading of videogame consoles was unpopular at first, but eventually helped change the way Americans viewed electronics.

"That's something that was very new with videogames," says Cifaldi. "It made us comfortable with this concept of refreshing your inherent technology every five to 10 years."

Moving to the internet

By the end of the '90s, videogames evolved again as Americans migrated to the internet. Between 1990 and 2000, the share of U.S. households with a personal computer jumped from 15% to just over half.

Online PC games brought back head-to-head matchups, with players across the globe competing against each other and jockeying for position on leaderboards to see who was the best of the best. Blizzard Entertainment was at the forefront, designing its own battle.net service to connect players across bestselling titles like "StarCraft" and "Diablo." In South Korea, the popularity of televised "StarCraft" tournaments inspired modern esports.

Some studios dreamed even bigger. In 1997, Origin Systems launched "UItima Online," the first megahit of a revolutionary new genre called the Massively Multiplayer Online Role-Playing Game, or MMORPG. It created a fantasy world where thousands of players could log in simultaneously for a collective experience. You could play as a hero, a villain, a bard, a craftsman and more.

To make it all work, Origin had to scale up its network to support what was at the time the largest active user base ever achieved. These innovations laid the foundations that allow billions of gamers to play online today.

Then there's "Doom," a game that pioneered the first-person shooter genre. It's hard to find a more influential game than this gory, controversial game from Id Software. Players could access the game's code and figured out how to rewrite it to make their own game content which they shared online. These modified game files, or "mods," added a new competition over who could create the best content, decades before "Minecraft" and "Roblox" turned the concept into billion-dollar businesses.

Big money

It's no surprise that tech companies also became gaming companies, with Microsoft and Sony now dominating the videogame console market. Microsoft's Xbox and Sony's PlayStation brands each have a dedicated following of players connected through Xbox Live and the PlayStation Network, just like Blizzard did with battle.net.

The future of gaming makes its legacy look like pocket change. Among the highlights: "Grand Theft Auto V" became the fastest-selling piece of media yet in 2013 when it made more than $1 billion in just three days. In 2014, Microsoft bought Mojang, the studio behind "Minecraft," for $2.5 billion, then in 2022 bought Activision Blizzard for $68.7 billion. Roblox, whose game has some 77 million daily active users who can create and sell their own in-game content, went public with its stock in 2021 and now has a market capitalization of about $38 billion.

These are the new version of high scores, in a multibillion-dollar industry that started with one student's pet project.

Mo Mozuch is a writer in New York. He can be reached at reports@wsj.com.

(END) Dow Jones Newswires

February 09, 2026 12:00 ET (17:00 GMT)

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