The US, and more specifically NA, is the largest territory for video game console sales both right before the crash happened and even to this day. Every single generation North America proves to be the most lucrative when it comes to console sales.  You can bet that a crash in the most lucrative area of video games would have found it's ripples affecting other territories.   

Besides, I wouldn't say that gaming was doing fine outside of NA. Gaming in Europe was very niche in particular, and the Famicom literally created a market surge when many analysts in Japan were wary about the viability of video games after the "Atari Shock". Also, while it hit NA the worst, globally video game sales were at an all time low at the time of the crash. 

Part of the reason the master system failed (in the US) is because it was crushed by the NES. It sold well in other reagions. Sega was pushing tech to enable its arcade games into the living room and would have continued to do so. 

For everywhere, really.

First of all, it's not just the "US market', but rather The Americas market. The whole continent.

Second of all, Nintendo proved with the NES that gaming was more than just a "toy" and thus not a fad. The market in the Americas had died, and the European one and Japanese would soon follow after, at the very least the home console(which is like 70% of the market as of right now, give or take), since most big players would not exist without Nintendo. Sega probably wouldn't make the genesis, since that was an answer to the NES, and Sony would also never going to enter the market as a result. And since MS created the XBox only to compete with Sony, that would be a no go.

Plus, like I said, most gaming staples were created by Nintendo and it's 3rd and 4rd gen consoles. Without them, I have no idea how many decades of gaming techniques and design behind we would all be.

Yeah, without Nintendo the "gaming vacuum" would have probably been filled by SEGA (for consoles), Apple (Apple II) and Commodore (C64). I really doubt that video gaming would have died without Nintendo and that people lost all interest in gaming.

Maybe many people only lost interest in these very simple and repetitive games the first and second gen hardware allowed.

Even with dumbed down graphics more complex games like Zelda, Metal Gear, Zork or King's Quest were impossible on the Atari 2600 and many other first and second gen consoles. With only 128 - 512 bytes of RAM, not much more than the highscore could be transfered to the next level/screen of a game.

Even simple things like remembering the items in your inventory, which items aren't in the "game world" anymore, which dialogues you already had with NPCs... would have used up far too much of these precious bytes of RAM. So nonlinear games with different tasks were out of the question.

The Master System didn't fair too well in Japan either, where it only amounted to 1M unit sales, compared to the Famicoms 19M. 

"Sega was pushing tech to enable its arcade games into the living room and would have continued to do so"

The only reason they developed the SG-1000 was because they heard Nintendo was creating a gaming only console (they were just working on a PC at the time), and the Master System is a direct successor to the SG-1000. Also, if Nintendo had never gone into the North American market in the first place Sega likely wouldn't have attempted to either, at least not for a long while. Most analysts were saying that Nintendo's move into North America was an extremely bad move. So, without the NES/Famicom, Sega would have A) Only created a PC at the time (because that was their only plan until they caught wind of Nintendo), and B) Never released their consoles into the North American market (As both the SG-1000 and SC-3000 were only available in very limited territories, and it wasn't until Sega saw the success of the NES that they decided to launch in American markets) 

Sega was never going to be the replacement for Nintendo. 

What you said.

The NES didn’t “save gaming” because there wasn’t really anything to save yet. The NES was more or less just a really successful console, but there was no guarantee that game brands would continue to grow beyond 1 console until Sega introduced the 16-bit generation and achieved it.

And my below post is more a response to other things (mainly because I’m ancient and actually lived through this period and was a pretty active member of gaming culture as a kid).

The console video gaming industry was in its infancy at the time and manufacturers didn’t know how to keep their brand alive long term. What happened with the Atari 2600 is many crappy games were released for it - and I don’t mean games that fat nerds take tantrums over because “therrr casual and I’m hardcore!” - these were shitty games that weren’t playable.

The Vic20 and C64 were seen as video game systems in Europe, not PCs. PCs were something pretty much specifically tied to Microsoft Windows and stuff like that. These consoles had better games on them, as did the SMS, and the NES, where it was available (you literally could only get it in certain cities in Europe until around the launch of the SNES) were what you wanted to play. No one thought of them as “next generation consoles” so much as just “consoles with better games.”

The first time we were introduced to new consoles as a “new generation” was the move from 8-bit to 16-bit: and Atari, C64, and NES weren’t two or three different generations, they were all just one: The 8-bit generation. Splitting all this stuff into different generations is just inaccurate to how things were marketed and understood back then; and it makes no sense to alter it, because all that does is make these so-called video game historians writing up story that didn’t happen.

The Mega Drive (Or Genesis/Exodus/Torah, whatever you want to call it in the US) as a new generation of video game systems was an effective strategy, and people saw it as a much more valuable console than the NES, and SNES followed with its own 16-bit console. What this achieved was Nintendo and Sega were both able to extend interest in their brand.  I think the SNES was also the one that more or less opened up the notion that the Nintendo and Sega were mainly Japanese things, because I don’t think people really saw it that way before (I assumed the NES was Scandinavian). But the SNES was where the importing of Japanese games became a major thing - but anyway, I’m rambling WAY off topic now.

The video game industry grew a lot with the 16-bit generation, and while on paper the NES did better overall, the popularity of the 16-bit generation far exceeded it. The NES was supported and sold from 1983 to 1994, while the SNES sold from 1992 to 1996. The years of the SNES were way more profitable for Nintendo, worldwide, than the NES-only years. Of course, the NES continuing to sell, helped, and so did the Gameboy; but the SNES annual sales were always higher than most NES years. What Nintendo and Sega did, was not only extend the life of their brand, but expand it.

CONCLUSION

So the concept of generations, introduced by Sega, is IMO the marketing/hardware strategy that “saved” the video game industry. The Mega Drive showed that Sega could both extend and expand their brand in a way no one had ever done before (except Commodore, but that was more or less then building another console that happened to catch fire too, not really seen as a “new generation of video games!” thing).

Another way of looking at it is that it was what really established and defined it, while the early years was a lot of experimentation until someone discovered a way to make it work as a long term business.

EPILOGUE

(just silly extra off-topic but related rambling)

Back on generations topic, the Saturn and N64 weren’t the 8th or 11th or 37th generation, they were the third generation of Nintendo and Sega hardware: in fact, there was a bit of confusion about the 32-bit generation thing Sega was marketing and the 64-bit console Nintendo had: did Nintendo jump ahead to the  generation AFTER the Saturn? Short lived as it became the 32/64 bit gen.

But then Sony came along with the PlayStation 1, PlayStation 2, etc... they just did generations better. It’s why Nintendo is really on a totally different generational track than Sony at this point.

Nintendo saw the failure of the N64, and they were like “We can’t be arrogant anymore, let’s just do what Sony did next gen, except Nintendoish” The GameCube was Nintendo’s attempt at making a PS2 clonebox, and everyone laughed because it was ridiculous and kiddy, they failed because Sony actually knew what they were doing and Nintendo was trying to copy. So Nintendo comes back and they’re like “ALRIGHT! We’ll start doing our own thing again!” The Wii was the revolution that disrupted Sony, and they did so BIG time. But then Nintendo went crazy and made the Wii U, which was Nintendo saying “now that we’re King again, try OUR take on High definition gaming!” and everyone laughed again! “OK! OK! The Switch, this is what we really meant!” And now everything is right in the world again =P

"the only reason they started to was because they saw that the gaming market was lucrative."

And Nintendo had a different reason`?

"In fact, the only reason they developed the SG-1000 was because they heard Nintendo was creating a gaming only console"

Citation needed.

"Also, if Nintendo had never gone into the North American market in the first place Sega likely wouldn't have attempted to either, at least not for a long while."

Pure speculation.

"Sega was never going to be the replacement for Nintendo."

Prove it.

The point is that outside the US, gaming was not in need of saving. Did the NES pushed gaming forward in popularity around the world? Yes, of course, but as far as saving goes, that's true only in the US.

He can’t. The guy is just one of these fanatical Nintendo boys who wants to make everything about Nintendo. I’m an ultra-fan if Nintendo myself, but these sorts who try to make up all these fake narratives “The mere word that Nintendo was making a console was what moved Sega to do the same!” just make me cringe. The problem is that these sorts tend to over-emphasize these mythological versions of history, and often downplay the real successes influences of Nintendo.

Eveb if that’s even true and Sega said “Ah! I just heard Nintendo is making a console, I guess that means we definitely MUST make one too... not because of any of those other consoles out there!” is a self defeating argument because Nintendo specifically cites ColecoVision as the reason they got into the console industry, thus you can use his logic to argue that ColecoVision is what really caused Sega to move to the living room.

Sega moves to home consoles because of a declining arcade industry. There is absolutely no reason to suggest that they needed Nintendo to somehow see the light! As well, they launched two consoles, one featuring a joystick, another featuring a keyboard. It wasn’t until later that they began making a d-pad console like Nintendo. If the guy wants to make an argument of how the NES influenced Sega, it’s the d-pad, that thing was revolutionary.

Not even close

Only in North America did the videogame market crash. Outside of it, videogames were not just healthy, but a growing force even before Nintendo arrived.

What it did, was resurrect the North American Console market. Nothing more, but also nothing less.