.And Atari put a 2600 into a 7800...let's not forget that. I'm not sure who truly invented backward compatibility. I guess you could say the 5200 and Coleco and eventually the Intellivision. But they created separate devices that were basically clones that borrowed the power and video from the parent consoles they plugged into. Yeah...the 7800 might technically be the first built in backwards compatible system and I believe it was always designed to be from the beginning?
It was designed to be because the 5200 wasn't and the thought was that that was a big reason why it failed. Nobody knew what the expectations of consumers were at that time, but it turned out that consumers expected the software they'd already bought for a company's system to work with subsequent models put out by that same company. There were a lot of reviews and news articles in the press where the writers seemed downright confused about the fact that they couldn't run their 2600 games on the 5200, and I think that reflected consumers' thinking as well. And that even extended initially to the Intellivision and Coleco Vision - you can find plenty of articles from that time that talk about these systems and say things like "but it can't play games from the most popular system, the Atari VCS." Everyone just expected every system to be able to play the most popular games at that time, and nobody had an idea that a new version of something would not be able to play games made for a simpler, older system.
Essentially it was like how we expect different PC's these days to work with older software, and even for computers with different operating systems (like Macs) to be able to run software made for the most popular OS (Windows).
That to me seems like kind of the natural order of things. I don't know when it changed in game consoles, or if it really ever has. You'd think if that thinking really changed, people wouldn't even be talking about the PS5 potentially being backward compatible - they still seem to care about it. It seems to me that it would be a big competitive advantage. I mean, MS tried a lot of stuff this generation with both the design and early features of the Xbox One to try to coax people who bought the system into sinking more money into it (e.g. by not being able to re-sell games), and they lost this generation badly as a result - a lot of it came off as cynical and anti-consumer. It's not all about how much money people spend post-purchase - you have to get people to buy your system in the first place. That's where backward compatibility matters, and I'm not sure that's any different now than it ever has been.
Somebody's going to counter my argument by saying the XB1 has a big backward compatible library, thereby disproving my theory, but it really doesn't. Only something like 30 original Xbox games work and a few hundred Xbox 360 games. It's hit or miss... and that's with only 2 previous generations. I think that in order to make backward compatibility a selling point, it has to be absolute. You can't say "it plays a selection of certain games!" because then nobody knows what those games are, and they don't want to keep having to consult a list when they either go out and buy a game, or even just think about dusting off an old copy of something they already have.
Backward compatibility also matters most at the beginning of a system's life when it has the smallest library of its own. People are more willing to buy early and then be patient if they can keep playing the games they already own while they wait for new ones. That helps build critical mass that gets those new games into production. The XB1 took a long time to get its backward compatibility going, and by the time it reached any acceptable level, it was too little, too late.