Video game crash of 1983
Encyclopedia
The North American video game crash was a serious event that brought an abrupt end to what is considered the second generation
of console video gaming in North America. Beginning in 1983, the crash almost destroyed the then-fledgling industry and led to the bankruptcy
of several companies producing home computer
s and video game console
s in North America
. It lasted about two years, and many business analysts of the time expressed doubts about the long-term viability of video game consoles. The video-game industry was revitalized a few years later, mostly due to the widespread success of the Nintendo Entertainment System
(NES), which was released in North America in and had become extremely popular by .
There were several reasons for the crash, but the main cause was supersaturation of the market with hundreds of mostly low-quality games which resulted in the loss of consumer confidence.
, the Atari 5200
, the Bally Astrocade
, the ColecoVision
, the Coleco Gemini
(a 2600 clone), the Emerson Arcadia 2001, the Fairchild Channel F System II
, the Magnavox Odyssey2, the Mattel
Intellivision
(and its just-released update with several peripherals, the Intellivision II), the Sears Tele-Games systems (which included both 2600 and Intellivision clones), the TandyvisioN (an Intellivision clone for Radio Shack
), and the Vectrex
.
Each one of these consoles had its own library of games, and many had large third-party libraries. Likewise, many of these same companies announced yet another generation of consoles for , such as the Odyssey3, and Atari 7800
.
Adding to the industry's woes was a glut of poor titles from hastily financed startup companies. These games, combined with weak high-profile Atari 2600 games, such as the video game version of the hit movie E.T. the Extra-Terrestrial
, seriously damaged the reputation of the industry. Finally, Atari's market-leading 2600
, then in its sixth year, was starting to approach saturation
.
s had primarily been sold in specialty computer stores at a cost of more than $1,000 USD
($ in 2010). However, by the early 1980s, many companies released a new class of computer, the home computer
that could connect to a TV
set and offered color graphics
and improved sound. The first of these systems were the Atari 400 and 800
, but many competing models vied for consumer attention. By , the TI 99/4A
and the Atari 400
were both at $349 ($ in 2009), Radio Shack
's Color Computer sold at $379 ($ in 2009), and Commodore had just reduced the price of the Commodore VIC-20
and the Commodore 64
to $199 ($ in 2009).
Because these and other home computers generally had more memory
available, and better graphic and sound capabilities than a console, they permitted more sophisticated games and could also be used for tasks such as word processing
and home accounting. Also, their games were often much easier to copy, since they came on floppy disk
s or cassette tapes instead of ROM
modules (though many of them continued to use ROM modules extensively). The use of a writable storage medium also allowed players to save games in progress, a feature useful for the increased complexity of computer games, and one not available on the consoles of the era.
In a strategy that directly affected its home computer arch-rival Atari, Commodore
explicitly targeted video game players in its advertising
by offering trade-ins toward the purchase of a Commodore 64 and suggesting that college-bound children would need to own computers, not video games.
was founded by Atari programmers
who left the company in because Atari did not allow credits to appear on the games and did not pay employees a royalty based on sales. At the time, Atari was owned by Warner Communications
, and the developers felt that they should receive the same recognition that musicians, directors, and actors got from Warner's other divisions. After Activision went into business, Atari
quickly sued to block sales of Activision's products, but never won a restraining order
and ultimately lost the case in . This court case legitimized third-party development, encouraging companies such as Quaker Oats (with their US Games
division) to rush to open video-game divisions, hoping to impress both stockholders and consumers. Companies lured away each other's programmers or used reverse engineering
to learn how to make games for proprietary systems. Atari even hired several programmers from Mattel
's Intellivision
development studio, prompting a lawsuit by Mattel against Atari that included charges of industrial espionage
.
Despite the lessons learned by Atari in the loss of its programmers to Activision, Mattel continued to try to avoid crediting game designers. Rather than reveal the names of Intellivision game designers
, Mattel instead required that a 1981 TV Guide interview with them change their names to protect their collective identities. ColecoVision designers worked in similar obscurity, feeding more departures to upstart competitors.
Unlike Nintendo
, Sega
, Sony
, or Microsoft
in later decades, the hardware manufacturers in this era lost exclusive control of their platforms' supply of games. With it, they also lost the ability to make sure that the toy stores were never overloaded with products. Activision, Atari and Mattel all had experienced programmers, but many of the new companies — rushing to join the market — did not have enough experience and talent to create the games. Titles such as Chase the Chuck Wagon
(about dogs eating food, bankrolled by the dog food company Purina), Skeet Shoot, and Lost Luggage were examples of games that companies made in the hopes of taking advantage of the video-game boom. While heavily advertised and marketed, these games were perceived to be of poor quality and did not catch on as hoped, further damaging the industry.
by releasing a version for the Atari 2600
. However, development was rushed so as to have the game out in time for the 1981 Christmas season. Although the game managed to sell well in terms of absolute numbers, Atari had grossly overestimated the number of sales it would generate. Critics and gamers universally panned the game as being nothing like the lively, colorful original. In the end, Atari only sold a little over half the number of cartridges it produced. Production cost overruns combined with the costs incurred with a big marketing campaign for the game resulted in huge losses for Atari.
The following year, Atari issued its widely advertised E.T.
game. Once again, it manufactured millions of units in anticipation of a major hit. Concerned about making the holiday season, Atari again rushed the game to market quickly, after a mere six weeks of development time. The end result was a disaster and it is widely considered to be one of the worst video games ever. To clear their inventory, Atari eventually ended up burying the unsold copies in a landfill in New Mexico
. Combined with the high costs for the movie license, ET became another financial disaster for Atari. Atari was sold two years later as the crash impacted upon the industry.
and US Games
, quickly folded. Unable to return the unsold games to defunct publishers after Christmas 1982, toy stores marked down the titles and placed them in discount bins and sale tables. By June , the market for the more expensive games had shrunk dramatically and was replaced by a new market of rushed-to-market, low-budget games.
A massive industry shakeout resulted. Magnavox
and Coleco
abandoned the video game business entirely. Imagic
withdrew its IPO the day before its stock was to go public; the company later collapsed. While the largest of the third-party cartridge makers, Activision
, survived for several more years on personal-computer platforms (thanks to the then-legal ability to average its income and recover millions of dollars in past tax payments from the IRS), most of the smaller software development houses supporting the Atari 2600 closed.
Additionally, the toy retailers which controlled consumer access to games had concluded that video games were a fad. That fad, they assumed, had ended, and the shelf space would be reassigned to different products; as a result, many retailers ignored video games for several years. This was the most formidable barrier that confronted Nintendo, as it tried to market its Famicom
system in the US. Retailers' opposition to video games was directly responsible for causing Nintendo's branding its product an "Entertainment System" rather than a "console", using terms such as "control deck" and "Game Pak", as well as producing a toy robot called R.O.B.
to convince toy retailers to allow it in their stores.
The sales of home video games had dropped considerably during this period, from $3 billion in 1982 to as low as $100 million in 1985, leading to bankruptcy for many game companies at the time. Following the release of the Nintendo Entertainment System
in 1985, the industry began recovering, with annual sales exceeding $2.3 billion by 1988, with 70% of the market dominated by Nintendo
.
to Japan
. When the video game market recovered by , the leading player was Nintendo
's NES
, with a resurgent Atari
battling Sega
's Master System
for the number-two spot soon after. By 1989, home video game sales in the United States had reached $5 billion, surpassing the 1982 peak of $3 billion during the previous generation. A large majority of the market was controlled by Nintendo, whose NES had sold over 30 million units in the United States by 1989, exceeding the sales of other consoles and personal computer
s by a considerable margin. While Sega would later rival Nintendo's success with the Mega Drive/Genesis, Atari never truly recovered and could not match the success of its competitors or its own 2600 console; it finally stopped producing game systems in after the failure of the Atari Jaguar
.
A second, highly visible result of the crash was the institution of measures to control third-party development of software. Using secrecy to combat industrial espionage
had failed to stop rival companies from reverse engineering the Mattel and Atari systems and hiring away their trained game programmers. Nintendo, and all the manufacturers who followed, controlled game distribution by implementing licensing restrictions and a security lockout system
. Would-be renegade publishers could not publish for each others' lines, as Atari, Coleco and Mattel had done, because in order for the cartridge to work in the NES, the cartridge had to contain the appropriate key chip
for the lock inside the console, and the publisher had to also acknowledge its license to Nintendo in the copyright notices. If no key chip was present or if the key chip did not match the lock inside the console, the game would not work.
Accolade achieved a technical victory in one court case against Sega
, challenging this control, even though it ultimately yielded and signed the Sega licensing agreement. Several publishers, notably Tengen
(Atari), Color Dreams
, and Camerica
, challenged Nintendo's control system during the 8-bit era by producing unlicensed NES games. The concepts of such a control system remain in use on every major video game console produced today, even with fewer "cartridge-based" consoles on the market than in the 8/16-bit era. Replacing the security chips in most modern consoles are specially-encoded optical discs that cannot be copied by most users and can only be read by a particular console under normal circumstances.
Nintendo reserved a large part of NES game revenue for itself by limiting most third-party publishers to only five games per year on its systems (some companies tried to get around this by creating additional company labels like Konami
's Ultra Games
label). It also required all cartridges to be manufactured by Nintendo, and to be paid for in full before they were manufactured. Cartridges could not be returned to Nintendo, so publishers assumed all the risk. As a result, some publishers lost more money due to distress sales of remaining inventory at the end of the NES era than they ever earned in profits from sales of the games. Nintendo portrayed these measures as intended to protect the public against poor-quality games, and placed a golden seal of approval on all games released for the system. Most of the Nintendo platform-control measures were adopted by later manufacturers such as Sega, Sony, and Microsoft.
of inexpensive home computer
s with the theme "Why buy your child a video game and distract them from school when you can buy them a home computer that will prepare them for university?" Marketing research for both the gaming and the home-computer industries tracked the change as millions of consumers shifted their intention to buy choices from game consoles to low-end computers that retailed for similar prices while still playing comparable games.
By , computers such as the BBC Micro
, Atari XL, Commodore 64
and Sinclair ZX Spectrum
had launched in Europe and were selling extremely well there, dominating the European games market and growing throughout and . The significantly lower price of computer games (some of which cost just 1% of the price of a computer, due to being stored on inexpensive cassette tapes or floppy disk
s rather than the ROM chips contained in the plastic cartridges of consoles) strengthened this domination and helped quickly create a mass computer games market. By the time of the 1983 North American crash, the European video game industry was mostly computer-based and most games were made by European publishers. This allowed the European market to thrive despite the crashing American market.
History of video game consoles (second generation)
In the history of computer and video games, the second generation began in 1976 with the release of the Fairchild Channel F and Radofin 1292 Advanced Programmable Video System....
of console video gaming in North America. Beginning in 1983, the crash almost destroyed the then-fledgling industry and led to the bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
of several companies producing home computer
Home computer
Home computers were a class of microcomputers entering the market in 1977, and becoming increasingly common during the 1980s. They were marketed to consumers as affordable and accessible computers that, for the first time, were intended for the use of a single nontechnical user...
s and video game console
Video game console
A video game console is an interactive entertainment computer or customized computer system that produces a video display signal which can be used with a display device to display a video game...
s in North America
North America
North America is a continent wholly within the Northern Hemisphere and almost wholly within the Western Hemisphere. It is also considered a northern subcontinent of the Americas...
. It lasted about two years, and many business analysts of the time expressed doubts about the long-term viability of video game consoles. The video-game industry was revitalized a few years later, mostly due to the widespread success of the Nintendo Entertainment System
Nintendo Entertainment System
The Nintendo Entertainment System is an 8-bit video game console that was released by Nintendo in North America during 1985, in Europe during 1986 and Australia in 1987...
(NES), which was released in North America in and had become extremely popular by .
There were several reasons for the crash, but the main cause was supersaturation of the market with hundreds of mostly low-quality games which resulted in the loss of consumer confidence.
Causes and factors
The American video game console crash of 1983 was caused by a combination of factors. Although some were more important than others, all played a role in saturating, and then imploding, the video game industry.Plethora of games and consoles
At the time of the U.S crash, there were numerous consoles on the market, including the Atari 2600Atari 2600
The Atari 2600 is a video game console released in October 1977 by Atari, Inc. It is credited with popularizing the use of microprocessor-based hardware and cartridges containing game code, instead of having non-microprocessor dedicated hardware with all games built in...
, the Atari 5200
Atari 5200
The Atari 5200 SuperSystem, commonly known as the Atari 5200, is a video game console that was introduced in 1982 by Atari Inc. as a higher end complementary console for the popular Atari 2600...
, the Bally Astrocade
Bally Astrocade
The Astrocade is an early video game console and simple computer system designed by a team at Midway, the videogame division of Bally. It was marketed only for a limited time before Bally decided to exit the market. The rights were later picked up by a third-party company, who re-released it and...
, the ColecoVision
ColecoVision
The ColecoVision is Coleco Industries' second generation home video game console which was released in August 1982. The ColecoVision offered arcade-quality graphics and gaming style, and the means to expand the system's basic hardware...
, the Coleco Gemini
Coleco Gemini
The Coleco Gemini was an Atari 2600 clone manufactured by Coleco.-Technical specifications:* Processor: 8-bit 6507* CPU speed: 1.19 MHz* RAM: 128 bytes* Resolution: 160x200, 128 Colors -History:...
(a 2600 clone), the Emerson Arcadia 2001, the Fairchild Channel F System II
Fairchild Channel F
The Fairchild Channel F is a game console released by Fairchild Semiconductor in August 1976 at the retail price of $169.95. It has the distinction of being the first programmable ROM cartridge-based video game console...
, the Magnavox Odyssey2, the Mattel
Mattel
Mattel, Inc. is the world's largest toy company based on revenue. The products it produces include Fisher Price, Barbie dolls, Hot Wheels and Matchbox toys, Masters of the Universe, American Girl dolls, board games, and, in the early 1980s, video game consoles. The company's name is derived from...
Intellivision
Intellivision
The Intellivision is a video game console released by Mattel in 1979. Development of the console began in 1978, less than a year after the introduction of its main competitor, the Atari 2600. The word intellivision is a portmanteau of "intelligent television"...
(and its just-released update with several peripherals, the Intellivision II), the Sears Tele-Games systems (which included both 2600 and Intellivision clones), the TandyvisioN (an Intellivision clone for Radio Shack
Radio shack
Radio shack is a slang term for a room or structure for housing radio equipment.-History:In the early days of radio, equipment was experimental and home-built. The first radio transmitters used a noisy spark to generate radio waves and were often housed in a garage or shed. When radio was first...
), and the Vectrex
Vectrex
The Vectrex is a vector display-based video game console that was developed by Western Technologies/Smith Engineering. It was licensed and distributed first by General Consumer Electric , and then by Milton Bradley Company after their purchase of GCE...
.
Each one of these consoles had its own library of games, and many had large third-party libraries. Likewise, many of these same companies announced yet another generation of consoles for , such as the Odyssey3, and Atari 7800
Atari 7800
The Atari 7800 ProSystem, or simply the Atari 7800, is a video game console re-released by Atari Corporation in January 1986. The original release had occurred two years earlier under Atari Inc. The 7800 had originally been designed to replace Atari Inc.'s Atari 5200 in 1984, but was temporarily...
.
Adding to the industry's woes was a glut of poor titles from hastily financed startup companies. These games, combined with weak high-profile Atari 2600 games, such as the video game version of the hit movie E.T. the Extra-Terrestrial
E.T. the Extra-Terrestrial
E.T. the Extra-Terrestrial is a 1982 American science fiction film co-produced and directed by Steven Spielberg, written by Melissa Mathison and starring Henry Thomas, Dee Wallace, Robert MacNaughton, Drew Barrymore, and Peter Coyote...
, seriously damaged the reputation of the industry. Finally, Atari's market-leading 2600
Atari 2600
The Atari 2600 is a video game console released in October 1977 by Atari, Inc. It is credited with popularizing the use of microprocessor-based hardware and cartridges containing game code, instead of having non-microprocessor dedicated hardware with all games built in...
, then in its sixth year, was starting to approach saturation
Market saturation
In economics, "market saturation" is a term used to describe a situation in which a product has become diffused within a market; the actual level of saturation can depend on consumer purchasing power; as well as competition, prices, and technology....
.
Competition from home computers
Until the late 1970s, microcomputerMicrocomputer
A microcomputer is a computer with a microprocessor as its central processing unit. They are physically small compared to mainframe and minicomputers...
s had primarily been sold in specialty computer stores at a cost of more than $1,000 USD
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
($ in 2010). However, by the early 1980s, many companies released a new class of computer, the home computer
Home computer
Home computers were a class of microcomputers entering the market in 1977, and becoming increasingly common during the 1980s. They were marketed to consumers as affordable and accessible computers that, for the first time, were intended for the use of a single nontechnical user...
that could connect to a TV
Television
Television is a telecommunication medium for transmitting and receiving moving images that can be monochrome or colored, with accompanying sound...
set and offered color graphics
Computer graphics
Computer graphics are graphics created using computers and, more generally, the representation and manipulation of image data by a computer with help from specialized software and hardware....
and improved sound. The first of these systems were the Atari 400 and 800
Atari 8-bit family
The Atari 8-bit family is a series of 8-bit home computers manufactured from 1979 to 1992. All are based on the MOS Technology 6502 CPU and were the first home computers designed with custom coprocessor chips...
, but many competing models vied for consumer attention. By , the TI 99/4A
Texas Instruments TI-99/4A
The Texas Instruments TI-99/4A was an early home computer, released in June 1981, originally at a price of USD $525. It was an enhanced version of the less-successful—and quite rare—TI-99/4 model, which was released in late 1979 at a price of $1,150...
and the Atari 400
Atari 8-bit family
The Atari 8-bit family is a series of 8-bit home computers manufactured from 1979 to 1992. All are based on the MOS Technology 6502 CPU and were the first home computers designed with custom coprocessor chips...
were both at $349 ($ in 2009), Radio Shack
Radio shack
Radio shack is a slang term for a room or structure for housing radio equipment.-History:In the early days of radio, equipment was experimental and home-built. The first radio transmitters used a noisy spark to generate radio waves and were often housed in a garage or shed. When radio was first...
's Color Computer sold at $379 ($ in 2009), and Commodore had just reduced the price of the Commodore VIC-20
Commodore VIC-20
The VIC-20 is an 8-bit home computer which was sold by Commodore Business Machines. The VIC-20 was announced in 1980, roughly three years after Commodore's first personal computer, the PET...
and the Commodore 64
Commodore 64
The Commodore 64 is an 8-bit home computer introduced by Commodore International in January 1982.Volume production started in the spring of 1982, with machines being released on to the market in August at a price of US$595...
to $199 ($ in 2009).
Because these and other home computers generally had more memory
Computer storage
Computer data storage, often called storage or memory, refers to computer components and recording media that retain digital data. Data storage is one of the core functions and fundamental components of computers....
available, and better graphic and sound capabilities than a console, they permitted more sophisticated games and could also be used for tasks such as word processing
Word processing
Word processing is the creation of documents using a word processor. It can also refer to advanced shorthand techniques, sometimes used in specialized contexts with a specially modified typewriter.-External links:...
and home accounting. Also, their games were often much easier to copy, since they came on floppy disk
Floppy disk
A floppy disk is a disk storage medium composed of a disk of thin and flexible magnetic storage medium, sealed in a rectangular plastic carrier lined with fabric that removes dust particles...
s or cassette tapes instead of ROM
Read-only memory
Read-only memory is a class of storage medium used in computers and other electronic devices. Data stored in ROM cannot be modified, or can be modified only slowly or with difficulty, so it is mainly used to distribute firmware .In its strictest sense, ROM refers only...
modules (though many of them continued to use ROM modules extensively). The use of a writable storage medium also allowed players to save games in progress, a feature useful for the increased complexity of computer games, and one not available on the consoles of the era.
In a strategy that directly affected its home computer arch-rival Atari, Commodore
Commodore International
Commodore is the commonly used name for Commodore Business Machines , the U.S.-based home computer manufacturer and electronics manufacturer headquartered in West Chester, Pennsylvania, which also housed Commodore's corporate parent company, Commodore International Limited...
explicitly targeted video game players in its advertising
Advertising
Advertising is a form of communication used to persuade an audience to take some action with respect to products, ideas, or services. Most commonly, the desired result is to drive consumer behavior with respect to a commercial offering, although political and ideological advertising is also common...
by offering trade-ins toward the purchase of a Commodore 64 and suggesting that college-bound children would need to own computers, not video games.
Loss of publishing control
ActivisionActivision
Activision is an American publisher, majority owned by French conglomerate Vivendi SA. Its current CEO is Robert Kotick. It was founded on October 1, 1979 and was the world's first independent developer and distributor of video games for gaming consoles...
was founded by Atari programmers
Game programmer
A game programmer is a software engineer, programmer, or computer scientist who primarily develops codebase for video games or related software, such as game development tools. Game programming has many specialized disciplines all of which fall under the umbrella term of "game programmer"...
who left the company in because Atari did not allow credits to appear on the games and did not pay employees a royalty based on sales. At the time, Atari was owned by Warner Communications
Warner Communications
Warner Communications or Warner Communications, Inc. was established in 1971 when Kinney National Company spun off its non-entertainment assets, due to a financial scandal over its parking operations and changed its name....
, and the developers felt that they should receive the same recognition that musicians, directors, and actors got from Warner's other divisions. After Activision went into business, Atari
Atari
Atari is a corporate and brand name owned by several entities since its inception in 1972. It is currently owned by Atari Interactive, a wholly owned subsidiary of the French publisher Atari, SA . The original Atari, Inc. was founded in 1972 by Nolan Bushnell and Ted Dabney. It was a pioneer in...
quickly sued to block sales of Activision's products, but never won a restraining order
Restraining order
A restraining order or order of protection is a form of legal injunction that requires a party to do, or to refrain from doing, certain acts. A party that refuses to comply with an order faces criminal or civil penalties and may have to pay damages or accept sanctions...
and ultimately lost the case in . This court case legitimized third-party development, encouraging companies such as Quaker Oats (with their US Games
US Games
US Games was a video game division of then-conglomerate Quaker Oats that formed in 1982 in order to develop games for the then-popular Atari 2600...
division) to rush to open video-game divisions, hoping to impress both stockholders and consumers. Companies lured away each other's programmers or used reverse engineering
Reverse engineering
Reverse engineering is the process of discovering the technological principles of a device, object, or system through analysis of its structure, function, and operation...
to learn how to make games for proprietary systems. Atari even hired several programmers from Mattel
Mattel
Mattel, Inc. is the world's largest toy company based on revenue. The products it produces include Fisher Price, Barbie dolls, Hot Wheels and Matchbox toys, Masters of the Universe, American Girl dolls, board games, and, in the early 1980s, video game consoles. The company's name is derived from...
's Intellivision
Intellivision
The Intellivision is a video game console released by Mattel in 1979. Development of the console began in 1978, less than a year after the introduction of its main competitor, the Atari 2600. The word intellivision is a portmanteau of "intelligent television"...
development studio, prompting a lawsuit by Mattel against Atari that included charges of industrial espionage
Industrial espionage
Industrial espionage, economic espionage or corporate espionage is a form of espionage conducted for commercial purposes instead of purely national security purposes...
.
Despite the lessons learned by Atari in the loss of its programmers to Activision, Mattel continued to try to avoid crediting game designers. Rather than reveal the names of Intellivision game designers
Blue Sky Rangers
The Blue Sky Rangers are the group of Intellivision game programmers who once worked for Mattel back in the early 1980s.When the Intellivision first came out in 1978, its games were all developed by an outside firm, APh Technological Consulting. Realizing that potential profits are much greater...
, Mattel instead required that a 1981 TV Guide interview with them change their names to protect their collective identities. ColecoVision designers worked in similar obscurity, feeding more departures to upstart competitors.
Unlike Nintendo
Nintendo
is a multinational corporation located in Kyoto, Japan. Founded on September 23, 1889 by Fusajiro Yamauchi, it produced handmade hanafuda cards. By 1963, the company had tried several small niche businesses, such as a cab company and a love hotel....
, Sega
Sega
, usually styled as SEGA, is a multinational video game software developer and an arcade software and hardware development company headquartered in Ōta, Tokyo, Japan, with various offices around the world...
, Sony
Sony
, commonly referred to as Sony, is a Japanese multinational conglomerate corporation headquartered in Minato, Tokyo, Japan and the world's fifth largest media conglomerate measured by revenues....
, or Microsoft
Microsoft
Microsoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions...
in later decades, the hardware manufacturers in this era lost exclusive control of their platforms' supply of games. With it, they also lost the ability to make sure that the toy stores were never overloaded with products. Activision, Atari and Mattel all had experienced programmers, but many of the new companies — rushing to join the market — did not have enough experience and talent to create the games. Titles such as Chase the Chuck Wagon
Chase the Chuck Wagon
Chase the Chuck Wagon is a 1983 promotional video game distributed by Purina for the Atari 2600/VCS home console. It was available only via mail by sending in proofs of purchase to Purina.- Gameplay :...
(about dogs eating food, bankrolled by the dog food company Purina), Skeet Shoot, and Lost Luggage were examples of games that companies made in the hopes of taking advantage of the video-game boom. While heavily advertised and marketed, these games were perceived to be of poor quality and did not catch on as hoped, further damaging the industry.
High-profile disasters
A core cause of the crash was two high-profile titles for the Atari 2600 that were disasters. In 1981, Atari attempted to take advantage of the craze following the arcade game Pac-ManPac-Man
is an arcade game developed by Namco and licensed for distribution in the United States by Midway, first released in Japan on May 22, 1980. Immensely popular from its original release to the present day, Pac-Man is considered one of the classics of the medium, virtually synonymous with video games,...
by releasing a version for the Atari 2600
Pac-Man (Atari 2600)
In 1982, Atari Inc. released a port of Namco's hit arcade game Pac-Man for its Atari 2600 video game console. Like the original arcade version, the player controls the titular character with a joystick...
. However, development was rushed so as to have the game out in time for the 1981 Christmas season. Although the game managed to sell well in terms of absolute numbers, Atari had grossly overestimated the number of sales it would generate. Critics and gamers universally panned the game as being nothing like the lively, colorful original. In the end, Atari only sold a little over half the number of cartridges it produced. Production cost overruns combined with the costs incurred with a big marketing campaign for the game resulted in huge losses for Atari.
The following year, Atari issued its widely advertised E.T.
E.T. the Extra-Terrestrial (Atari 2600)
E.T. the Extra-Terrestrial is a 1982 adventure video game developed and published by Atari, Inc. for the Atari 2600 video game console. It is based on the film of the same name, and was designed by Howard Scott Warshaw...
game. Once again, it manufactured millions of units in anticipation of a major hit. Concerned about making the holiday season, Atari again rushed the game to market quickly, after a mere six weeks of development time. The end result was a disaster and it is widely considered to be one of the worst video games ever. To clear their inventory, Atari eventually ended up burying the unsold copies in a landfill in New Mexico
Atari video game burial
The Atari video game burial was a mass burial of unsold video game cartridges, consoles, and computers in a New Mexico landfill site, undertaken by American video game and home computer company Atari, Inc. in 1983. The goods disposed of through the burial are generally believed to have been...
. Combined with the high costs for the movie license, ET became another financial disaster for Atari. Atari was sold two years later as the crash impacted upon the industry.
Immediate effects
The release of so many new games in flooded the market. Most stores had insufficient space to carry new games and consoles. As stores tried to return the surplus games to the new publishers, the publishers had neither new products nor cash to issue refunds to the retailers. Many publishers, including Games by ApolloGames By Apollo
Games by Apollo was an early third-party developer for the Atari 2600, based in Richardson, Texas. Founded by Pat Roper in October 1981 by as a subsidiary of his National Career Consultants , their first game was Skeet Shoot...
and US Games
US Games
US Games was a video game division of then-conglomerate Quaker Oats that formed in 1982 in order to develop games for the then-popular Atari 2600...
, quickly folded. Unable to return the unsold games to defunct publishers after Christmas 1982, toy stores marked down the titles and placed them in discount bins and sale tables. By June , the market for the more expensive games had shrunk dramatically and was replaced by a new market of rushed-to-market, low-budget games.
A massive industry shakeout resulted. Magnavox
Magnavox
Magnavox is a US electronics company founded by Edwin Pridham and Peter L. Jensen, who invented the moving-coil loudspeaker in 1915 at their lab in Napa, California. They formed Magnavox in 1917 in order to market their inventions....
and Coleco
Coleco
Coleco is an American company founded in 1932 by Maurice Greenberg as "Connecticut Leather Company". It became a highly successful toy company in the 1980s, known for its mass-produced version of Cabbage Patch Kids dolls and its video game consoles, the Coleco Telstar and...
abandoned the video game business entirely. Imagic
Imagic
Imagic was a short-lived American video game developer and publisher that developed games for the Atari 2600, Intellivision and other video game consoles in the early 1980s...
withdrew its IPO the day before its stock was to go public; the company later collapsed. While the largest of the third-party cartridge makers, Activision
Activision
Activision is an American publisher, majority owned by French conglomerate Vivendi SA. Its current CEO is Robert Kotick. It was founded on October 1, 1979 and was the world's first independent developer and distributor of video games for gaming consoles...
, survived for several more years on personal-computer platforms (thanks to the then-legal ability to average its income and recover millions of dollars in past tax payments from the IRS), most of the smaller software development houses supporting the Atari 2600 closed.
Additionally, the toy retailers which controlled consumer access to games had concluded that video games were a fad. That fad, they assumed, had ended, and the shelf space would be reassigned to different products; as a result, many retailers ignored video games for several years. This was the most formidable barrier that confronted Nintendo, as it tried to market its Famicom
Nintendo Entertainment System
The Nintendo Entertainment System is an 8-bit video game console that was released by Nintendo in North America during 1985, in Europe during 1986 and Australia in 1987...
system in the US. Retailers' opposition to video games was directly responsible for causing Nintendo's branding its product an "Entertainment System" rather than a "console", using terms such as "control deck" and "Game Pak", as well as producing a toy robot called R.O.B.
R.O.B.
R.O.B. , released in Japan as the , is an accessory for the Nintendo Entertainment System. It was released in July 1985 in Japan and later that year in North America. It had a short product lifespan, with support for only two games which comprised the "Robot Series"; Gyromite and Stack-Up. R.O.B...
to convince toy retailers to allow it in their stores.
The sales of home video games had dropped considerably during this period, from $3 billion in 1982 to as low as $100 million in 1985, leading to bankruptcy for many game companies at the time. Following the release of the Nintendo Entertainment System
Nintendo Entertainment System
The Nintendo Entertainment System is an 8-bit video game console that was released by Nintendo in North America during 1985, in Europe during 1986 and Australia in 1987...
in 1985, the industry began recovering, with annual sales exceeding $2.3 billion by 1988, with 70% of the market dominated by Nintendo
Nintendo
is a multinational corporation located in Kyoto, Japan. Founded on September 23, 1889 by Fusajiro Yamauchi, it produced handmade hanafuda cards. By 1963, the company had tried several small niche businesses, such as a cab company and a love hotel....
.
Long-term effects
The North American video game crash had two long-lasting results. The first result was that dominance in the home console market shifted from the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
to Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
. When the video game market recovered by , the leading player was Nintendo
Nintendo
is a multinational corporation located in Kyoto, Japan. Founded on September 23, 1889 by Fusajiro Yamauchi, it produced handmade hanafuda cards. By 1963, the company had tried several small niche businesses, such as a cab company and a love hotel....
's NES
Nintendo Entertainment System
The Nintendo Entertainment System is an 8-bit video game console that was released by Nintendo in North America during 1985, in Europe during 1986 and Australia in 1987...
, with a resurgent Atari
Atari
Atari is a corporate and brand name owned by several entities since its inception in 1972. It is currently owned by Atari Interactive, a wholly owned subsidiary of the French publisher Atari, SA . The original Atari, Inc. was founded in 1972 by Nolan Bushnell and Ted Dabney. It was a pioneer in...
battling Sega
Sega
, usually styled as SEGA, is a multinational video game software developer and an arcade software and hardware development company headquartered in Ōta, Tokyo, Japan, with various offices around the world...
's Master System
Sega Master System
The is a third-generation video game console that was manufactured and released by Sega in 1985 in Japan , 1986 in North America and 1987 in Europe....
for the number-two spot soon after. By 1989, home video game sales in the United States had reached $5 billion, surpassing the 1982 peak of $3 billion during the previous generation. A large majority of the market was controlled by Nintendo, whose NES had sold over 30 million units in the United States by 1989, exceeding the sales of other consoles and personal computer
Personal computer
A personal computer is any general-purpose computer whose size, capabilities, and original sales price make it useful for individuals, and which is intended to be operated directly by an end-user with no intervening computer operator...
s by a considerable margin. While Sega would later rival Nintendo's success with the Mega Drive/Genesis, Atari never truly recovered and could not match the success of its competitors or its own 2600 console; it finally stopped producing game systems in after the failure of the Atari Jaguar
Atari Jaguar
The Atari Jaguar is a video game console that was released by Atari Corporation in 1993. It was the last to be marketed under the Atari brand until the release of the Atari Flashback in 2004. It was designed to surpass the Mega Drive/Genesis, Super Nintendo Entertainment System, and the Panasonic...
.
A second, highly visible result of the crash was the institution of measures to control third-party development of software. Using secrecy to combat industrial espionage
Industrial espionage
Industrial espionage, economic espionage or corporate espionage is a form of espionage conducted for commercial purposes instead of purely national security purposes...
had failed to stop rival companies from reverse engineering the Mattel and Atari systems and hiring away their trained game programmers. Nintendo, and all the manufacturers who followed, controlled game distribution by implementing licensing restrictions and a security lockout system
Lock-out chip
In a general sense, a lockout chip is a chip within an electronic device to prevent other manufacturers from using a company's device to perform certain functions....
. Would-be renegade publishers could not publish for each others' lines, as Atari, Coleco and Mattel had done, because in order for the cartridge to work in the NES, the cartridge had to contain the appropriate key chip
10NES
The 10NES system is a lock-out system designed for the American version of the Nintendo Entertainment System video game console. Various companies found ways to bypass the authorization chip.-Design:...
for the lock inside the console, and the publisher had to also acknowledge its license to Nintendo in the copyright notices. If no key chip was present or if the key chip did not match the lock inside the console, the game would not work.
Accolade achieved a technical victory in one court case against Sega
Sega
, usually styled as SEGA, is a multinational video game software developer and an arcade software and hardware development company headquartered in Ōta, Tokyo, Japan, with various offices around the world...
, challenging this control, even though it ultimately yielded and signed the Sega licensing agreement. Several publishers, notably Tengen
Tengen (company)
Tengen was a video game publisher and developer that was created by arcade game manufacturer Atari Games.-History:Atari had been split into two distinct companies. Atari Corporation was responsible for computer and console games and hardware and owned the rights to the Atari brand for these domains...
(Atari), Color Dreams
Color Dreams
Color Dreams was a company that developed video games for the 8-bit Nintendo Entertainment System . While most companies that developed NES games obtained an official license from Nintendo to produce game cartridges, Color Dreams was unusual in that it developed NES games without an official license...
, and Camerica
Camerica
Camerica was a company owned and operated by David J. Harding. It was a video game company that was notable for producing unlicensed Nintendo Entertainment System games and hardware. It was founded in 1988 and published games through 1992. It created a number of peripherals for the NES, including...
, challenged Nintendo's control system during the 8-bit era by producing unlicensed NES games. The concepts of such a control system remain in use on every major video game console produced today, even with fewer "cartridge-based" consoles on the market than in the 8/16-bit era. Replacing the security chips in most modern consoles are specially-encoded optical discs that cannot be copied by most users and can only be read by a particular console under normal circumstances.
Nintendo reserved a large part of NES game revenue for itself by limiting most third-party publishers to only five games per year on its systems (some companies tried to get around this by creating additional company labels like Konami
Konami
is a Japanese leading developer and publisher of numerous popular and strong-selling toys, trading cards, anime, tokusatsu, slot machines, arcade cabinets and video games...
's Ultra Games
Ultra Games
Ultra Software Corporation was a spinoff company created in 1988 as a subsidiary of Konami of America, in an effort to get around Nintendo of America's strict licensing rules for the North American Konami release games for Nintendo consoles. One of these rules was that a third-party company could...
label). It also required all cartridges to be manufactured by Nintendo, and to be paid for in full before they were manufactured. Cartridges could not be returned to Nintendo, so publishers assumed all the risk. As a result, some publishers lost more money due to distress sales of remaining inventory at the end of the NES era than they ever earned in profits from sales of the games. Nintendo portrayed these measures as intended to protect the public against poor-quality games, and placed a golden seal of approval on all games released for the system. Most of the Nintendo platform-control measures were adopted by later manufacturers such as Sega, Sony, and Microsoft.
Effects on world gaming markets
In Europe, the early years of personal computing (1981–1985) were spearheaded by the very aggressive marketingMarketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
of inexpensive home computer
Home computer
Home computers were a class of microcomputers entering the market in 1977, and becoming increasingly common during the 1980s. They were marketed to consumers as affordable and accessible computers that, for the first time, were intended for the use of a single nontechnical user...
s with the theme "Why buy your child a video game and distract them from school when you can buy them a home computer that will prepare them for university?" Marketing research for both the gaming and the home-computer industries tracked the change as millions of consumers shifted their intention to buy choices from game consoles to low-end computers that retailed for similar prices while still playing comparable games.
By , computers such as the BBC Micro
BBC Micro
The BBC Microcomputer System, or BBC Micro, was a series of microcomputers and associated peripherals designed and built by Acorn Computers for the BBC Computer Literacy Project, operated by the British Broadcasting Corporation...
, Atari XL, Commodore 64
Commodore 64
The Commodore 64 is an 8-bit home computer introduced by Commodore International in January 1982.Volume production started in the spring of 1982, with machines being released on to the market in August at a price of US$595...
and Sinclair ZX Spectrum
ZX Spectrum
The ZX Spectrum is an 8-bit personal home computer released in the United Kingdom in 1982 by Sinclair Research Ltd...
had launched in Europe and were selling extremely well there, dominating the European games market and growing throughout and . The significantly lower price of computer games (some of which cost just 1% of the price of a computer, due to being stored on inexpensive cassette tapes or floppy disk
Floppy disk
A floppy disk is a disk storage medium composed of a disk of thin and flexible magnetic storage medium, sealed in a rectangular plastic carrier lined with fabric that removes dust particles...
s rather than the ROM chips contained in the plastic cartridges of consoles) strengthened this domination and helped quickly create a mass computer games market. By the time of the 1983 North American crash, the European video game industry was mostly computer-based and most games were made by European publishers. This allowed the European market to thrive despite the crashing American market.
Further reading
- DeMaria, Rusel & Wilson, Johnny L. (2003). High Score!: The Illustrated History of Electronic Games (2nd ed.). New York: McGraw-Hill/Osborne. ISBN 0-07-222428-2.
External links
- Article at The Dot Eaters, a chronicle of the Great Videogame Crash
- The Golden Age of Video Game Arcades (a 200-page story contained within Twin Galaxies' Official Video Game & Pinball Book of World Records) by Walter Day (1998), ISBN 1-887472-25-8
- Classic Gaming Expo site Biographies and history of the era
- Official Intellivision History Site by the original programmers
- The History of Computer Games: The Atari Years Written by Chris Crawford, a game designer at Atari during the crash
- Detailed C64 Chronology Events & Game release dates (1982–1990)
- The Great Video Game Crash Of 1983 - Television Tropes & Idioms