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Initial development began in 1985 and was supported by Nolan Bushnell's company Axlon. The team created a prototype which used a modified ColecoVision console to combine interactive images with a video stream transmitted through a cable. As a storage medium Nemo employed VHS tapes that contained computer data and multiple tracks of video and audio.
To take the project beyond prototype status they searched for a partner who would fund further development. The Hasbro toy company agreed to invest $7 million in exchange for the video game rights to the technology.
Three short trial games were finished by the middle of 1986:
- Scene of the Crime, a four-minute interactive mystery,
- Bottom of the Ninth Inning, a baseball game, and
- an interactive music video for the Cars' song You Might Think.
The next step was the interactive movie Night Trap. In 1987, Zito created the second full-size game named Sewer Shark. After filming for Sewer Shark was done, Hasbro abandoned the project. Zito purchased the rights to the games and stored everything in a Rhode Island warehouse.
It wasn't until the early 1990s that the CD-ROM became an affordable storage medium for video game consoles, enabling full motion video (FMV) games at home. Sega was looking for content for the 1992 introduction of the Sega CD accessory. They got in touch with Zito who created versions of Sewer Shark and Night Trap for Sega CD through his Digital Pictures company. Ports to other systems would follow.
Footage of a presentation of a NEMO prototype to Hasbro executives can be found in the Sega CD version of Night Trap when entering a cheat code. This footage is from December 1986, recorded in Pawtucket, Rhode Island (the hometown of Hasbro). Lawrence H. Bernstein, working for Milton Bradley Company at that time, plays Scene of the Crime, the prototype of Night Trap.
- Steven L. Kent: The Ultimate History of Video Games. Three Rivers Press / Random House, 2001. ISBN 0-7615-3643-4. of interest are the sections:
- Axlon, A.G. Bear, and Nemo - p. 271–276
- The Birth of Digital Pictures p. 453–455
- Action Max, a VHS-based games system which was released
- View-Master Interactive Vision, another VHS based game system
- VHS: The Future of Gaming at GameSpy
- YouTube video of the hidden scene in the Sega CD game Night Trap (Read 2011-10-27)