Formation
American Video Entertainment (AVE) was formed in 1990 as a subsidiary of a semiconductor manufacturing company called Macronix. Macronix had made a play to manufacture ROM chips for Nintendo and their NES, but were turned down as they were unwilling to work with manufacturers outside of Japan. Spurned, they developed NINA (NintendoCompatible), a chip designed to circumvent Nintendo's 10NES lock-out circuit, and offered to publish and distribute games for developers using NINA and their own ROM chips.
Developers
AVE only developed two games by themselves - Blackjack and Dudes with Attitude. The rest of their projects were either purchased from freelance programmers or licensed from the pre-existing Asian unlicensed game industry thriving in China and Taiwan.
Downfall
Even with the looming shadow of a very annoyed Nintendo hovering overhead, AVE were able to craft good relations with several major retailers like Toys R Us. Initially, Nintendo altered the 10NES system to lock out unlicensed games like AVE's. They initially responded by setting up a hotline that would teach callers how to modify their NES systems to play such games, with a $10-off coupon thrown into the bargain, but eventually things got a lot hairier:
On January 7th 1991, AVE - who at this point were rapidly approaching bankruptcy - filed a $105 million anti-trust lawsuit against Nintendo and their American branch in the US District Court in San Francisco, alleging an illegal monopoly on account of modifying their systems to lock-out competitors. If this sounds familiar, Tengen were taking much the same case through the US legal system at the time.
The case between AVE and Nintendo was eventually settled under a secrecy order - AVE founder Richard Frick would later attribute their loss to judicial appointments made by the Reagan administration - and without revenue from the NES market AVE were unable to shift into the Genesis market. They would declare bankruptcy around a year later, with all remaining stock either scrapped or sold off to discounters.
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