Starting in 1987 with the PC Engine in Japan and ending in 1996, with the last console being the Neo-Geo in 1991, the fourth generation of video game consoles consisted primarily of games and systems programmed for the 16-bit era. Main article: Fourth generation of video game consoles In the remaining years of the decade, Sega ignites a console war with Nintendo, developers that had been affected by the crash experimented with the more advanced graphics of the PC, and Nintendo released the Game Boy, which would become the best-selling handheld gaming device for the next two-decades.

Up until this point, most investors believed video games to be a fad that has since passed. It took home consoles years to recover from the crash, but Nintendo filled in the void with its Nintendo Entertainment System (NES), reviving interest in consoles. Another, the rising influence of the home computer, and a lack of quality in the games themselves lead to an implosion of the video game market that nearly destroyed the industry. The decade began amidst a boom in the arcade business with giants like Atari still dominating the market since the late-1970s.

It was a decade of highs and lows for video games. The 1980s was the second decade in the industry's history.

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