I'm really unsure why there is much debate going on here. Prices of these things at launch is very known and easily confirmbable. The situations were pretty clear, as well. It gives a lot of "oh, well that's the reason" hindsight, to be sure, but still.
I don't know how anyone could imagine remembering in 1987, or 1988 for that matter, that Nintendo was not completely dominating the scene. Yes, the NES was first available in the USA in 1985. October 1985. Who actually had one of these things in 1985? Nobody I knew at the time. It was a very expensive piece of kit and Nintendo was pushing the R.O.B. Hard. And failing, yeah, but they were also pushing it with the Light Gun for Duck Hunt/Hogan's Alley. So the fallback at the time was the Control deck. One NES console and two gamepads and nothing else. My brother got that basic system in fall 1987, and had to shell out another $40 to get Super Mario Bros. along with it. So now imagine it's 1987, the NES is available in a basic set with two gamepads for $199 and no game... it's almost two years since it first came out and that's still the standard retail price, and everyone, everyone is eating it up and asking for seconds. So in your fantasy here comes a TurboGrafx-16 to the USA market the same year. Do you really think that with the 1987 library it would have stood a chance? Hell no! Same price, one gamepad, complete unknown titles, and most importantly the NES was hot at this point in time with no lack of steam propelling it forward into the 90s. It would have been completely insane for NEC or for anyone to look at the market as it was in the USA at that point in time and say, hey we would really like to take Nintendo on. The 1985 launch of the NES was actually a bit of a stall for the lack of software and a general "wait and see" approach from both consumers and retailers, the 1982 crash was just so hard financially that nobody honestly believed new (and better) games had much of a chance.
As for 1989, well, the library was there, at least in the fact that it existed. It just helped them almost not at all when so many titles were not localized (complete Japanese, or just obscure themes alien to Americans), and absolutely detrimental when none of the Nintendo ported titles were available to them to market to America (or the rest of the world). Being ten dollars more expensive than the Sega Genesis MSRP, well that hurt. It hurt even more when Sega was proud enough to put graphics of their game directly on the front of the box; Sega, after at least half a decade of getting stomped by Nintendo in sales, had figured out how to market themselves well as a more upscale, higher-end alternative. The TurboGrafx-16 advertising at every turn had a very MTV appearance to it, and while this was intentional as they wanted to promote it as the next cool thing, it failed with the mindshare gain Sega got by fronting better graphical features so well. Another thing that hurt, not only no second controller, but no means to plug one in without doing what? Spending more money. When you market to kids, who either mow lawns to get their own stuff or beg their parents for birthday/holiday gifts, this kind of piecemealing does not go over well. The TurboBooster was perceived by a lot of folks at the time as an unnecessary oddity despite its benefit, it just seemed like a money grab, and well, $399 for the Turbo CD... who is going to spend $600+ (199+399 & tax) for a complete set? This is now Neo Geo territory and as a home console that was pretty well a not a contender for #1. Some of this is understandable. Being so very Japanese, with a more solitary gameplay experience a single pad port makes sense. But when American kids pile in front of the TV at sleepovers, the one-pad system is at a disadvantage. The investment of localization was something that the original developers of PC Engine titles at the time were not only not interested in, they really weren't well prepared to do it in the first place. Considering how many titles NEC localized all on their own, they really were doing a vast amount of work putting things together in a way that an American could enjoy. Trouble is, they were doing it with Cyber-Core, instead of say Download, although for the obvious reason that it was a lot easier to do.
The amazing thing is the turnaround, at least for those who jumped in despite all that. Game prices for the system tended to drop quickly, much more quickly than either NES or Genesis games. Witness typical pricetags for the standalone console only a year or so later, although the real discount didn't hit til TTi lit the fire-sale to sacrifice for the coming of the TurboDuo. And the Japanese market just continued to crank out games with every arcade port, NES port, or whatever oddity they could dream up, the cheapness of CD-ROM game manufacturing led to low import game prices and the huge selection of arcade games meant little in the way of a language barrier to stop someone from trying things out.
Still, all the while that things were leading to this, the NES market was simply raging. From the beginning before USA launch, to the very end, the roadblock their competition had forced them to drive the backroads. Some things could have been fixed easily (second controller port, AV output built-in without add-ons), others were not so easily fixed (fewer 2-player titles, difficult localization) and many out of their control (other companies with advertisers steamrolling the business, legal obligations limiting available titles.). The unique set of circumstances that dealt NEC the cards they played had as much to do with their relative lack of sales as it did with the esoteric library of high quality games over time. Honestly, I think that entire melange is the very reason the platform has the legs it does so far past its prime. It's almost like this secret underground console that popped its head out in the winter, saw its shadow and retreated, not seen in the wild again. Put it another way, would you really prefer it if your Turbo were more... Sonical than Bonkified? Think about it.
