History of Video Games - Part 4
The Great Video Game Crash of 1983
Catch Up on the Series
3 - Have You Played Atari Today?
The Spielberg Effect
Stephen Spielberg had rocketed to success in Hollywood as part of New Hollywood. He would come to create the start of what today we call the American blockbuster that dominates box offices. Movies like Jaws put him on the map and in 1977 he released Close Encounters of the Third Kind. That movie was a big box office success story, and he was looking forward to seeing what to do next. At one point he considered a movie about aliens stalking and terrorizing a family. The project would be shelved, and he went off to film Raiders of the Lost Ark.
While filming Raiders, Spielberg came up with a concept around an alien that would befriend an autistic child. This was the initial draft to E.T., which he would pitch to Columbia Pictures. However, the studio didn’t see money in it and felt it was too family-friendly. Now, to be slightly fair to the studio, the 1970s were not exactly a peak era for family films, and this is when Hollywood would start to go for the big home runs in the 80s. Nevertheless, Spielberg was committed to E.T. and convinced Universal to buy the script from Columbia and make it. Not only would it be a decision that would go on to make them a lot of money, but it would also be the start of the partnership Universal still has with Spielberg to this day.
On June 2, 1982; E.T. the Extra-Terrestrial opened in theaters across the United States. It was a hit. Like many of his films, it would skyrocket to massive box office success and left a permanent print on movie culture and history. Stephen Spielberg was on top of the movie world again. That’s when Warner CEO Steve Ross came calling. Ross saw the success of the movie and pitched Universal and Stephen on giving them the video game rights for their Atari division. This was a chance for Spielberg to conquer the new emerging industry of video games. At the time, arcade gaming was exploding, and Atari was becoming more and more part of the mainstream. With dollar signs and visions in their heads, the rights were sold to Warner for $25 million (close to $80 million in today’s money) as the most expensive license rights sold for a video game yet.
"I think it's a dumb idea. We've never really made an action game out of a movie." - Atari CEO Ray Kassar on being told to make an E.T. game 🤨
It was a new era. Universal Studios, Stephen Spielberg, and Warner’s Atari platform would team up to launch what can be considered the first heavily anticipated video game. All these powerhouse players were ready to take video games to the next level. But it wasn’t all sunshine and rainbows. When asked about the game, Atari CEO Ray Kassar responded "I think it's a dumb idea. We've never really made an action game out of a movie." Despite the rights being sold in the summer of 82, Spielberg had requested that the game be done by Christmas. The roots for the Great Video Game Crash of 1983 had been planted.
1982
In the early eighties, Atari was video game royalty. Warner's Atari was seemingly unstoppable between the arcade machines and their home consoles. Every year, more systems would be sold, and a video game system would enter the top list of wanted Christmas presents. The games were churning out, and Atari had faith that their brand was becoming the premier video game destination. It had established itself as the home of the premier gaming titles and become a wanted piece of technology in middle-class households. It was time to take the next step.
Atari was putting together the pieces for a massive 1982 holiday. They were going to launch the highly anticipated E.T. game adaptation and their new console the Atari 5200. The 5200 was created to compete with all the new rivals such as Intellivision and ColecoVision. At first, the Atari 5200 would be a true next-generation system with better hardware. However, the home computer revolution began with computers like the Apple II and the Commodore PET becoming household names. Seeing the opportunity of the computer industry, the originally planned 5200 specs were repurposed as the Atari 8-bit family of computers. Due to this, the 5200 would launch with specs much closer to the original 2600, taking away what would have been a true next-generation experience.
So, with the set plans for a new console and E.T., it was time to set them in motion. After securing the rights to E.T., Atari chose Howard Scott Warshaw to develop it. After being promised an all-paid expenses trip to Hawaii, Warshaw was flown to meet with Spielberg to discuss the game. His pitch was on the concept of having E.T. look for interplanetary phone pieces that would be collected to “phone home” to complete the game. He also planned to have adults as the antagonists. However, Spielberg made it known he was not a fan of the idea and wanted something closer to Pac-Man. Now, Spielberg deserves to be criticized for demanding it was released that holiday, but Warshaw ignored him and decided to go with his original plan. In hindsight, Spielberg’s idea probably would’ve been better.
Now, Howard Scott Warshaw was not a bad game developer. He had worked on Yar’s Revenge, a game which received middling reviews when released but is now considered a classic. This was not the first time he had worked with Stephen Spielberg. Spielberg has had an off-and-on relationship with the video game industry. Warshaw made the adaptation of Raiders of the Lost Ark with Spielberg’s consultation. That game was well received and was a hit, released in time for the 1982 holiday. But E.T. was a different beast altogether. Unlike Raiders, the game’s time constraints led to processes such as audience testing being skipped. Atari had become so confident in their brand and the E.T. name that they immediately ordered millions of cartridges. When the game was released, a time bomb set off for Atari and the entire games industry.
The Great Video Game Crash of 1983
The grand 1982 holiday Atari planned was a complete dud. The Atari 5200 was a failure from the get-go, with many consumers sticking with the 2600 as they didn’t feel the 5200 gave them a reason to upgrade. Even worse, the original launch of the console did not have backward compatibility and the 5200’s small catalog were slightly upgraded versions of current games. E.T. was a success, amassing over 2.5 million copies sold for the Christmas holiday season. However they had overproduced, and some consumers hated the game right away. Hundreds of thousands of copies were returned, and Atari began to make mistakes in dealing with distributors. With the rise of competitors, Atari tried to punish stores that sold other consoles by canceling distribution deals, angering some major retailers, and turning away potential customers. E.T. had millions of unsold copies waiting, and the rush to pick the game up was dying. Today, E.T. is considered by many as the WORST video game of all time. Just as quickly as the gaming market came - it was about to crash.
One reason for the crash that is often missed is the rise of the home computer market. These computers not only helped with new computing tasks, but many of them could play games of their own. When families looked into getting that big new piece of tech for the holiday season, they saw a home computer as fitting the entire family’s needs over just a video game system for the kids. In fact, 1982 saw the release of one of the most famous computers in history – the Commodore 64. Today, the Commodore 64 is a fond memory in gaming history as it would amass its own impressive gaming library. Add in other popular computers from Apple and even Atari’s own, and you have a new rival to the industry they took for granted.
At the start of 1983 the video game industry sat at the value of $3.2 billion dollars, by 1985 it would sit at $100 million (that’s from about $9 billion to $285 million in today’s dollars). A massive drop of over 90 percent. There are some accepted facts and some debates on what caused the crash. First, there was the oversaturation of the market. With new competition came more games, many of which were exclusive console versions of popular arcade titles, but also many rushed games similar to E.T. Distribution at the time was based on exclusive partnerships and many retailers weren’t ready for what today we now call the “console wars,” leading to bad relationships and broken egos by Atari higher-ups. Video game distribution was based on making expensive cartridges that would be manufactured ahead of time and sold, with the hope of selling all the cartridges to make a profit. With the heavy influx of games, many cartridges were overproduced and would go on to sit on store shelves, leading to many being returned to developers.
Another factor was the Atari 2600 lacking a true successor. In North America, Atari was king, but many of its original customers were starting to outgrow the console either by age or want. The technology was aging, and gamers wanted something new. The Atari 5200 failed to deliver that, and if you stayed loyal to games, you stuck with the 2600 or a competitor during those crash years. Gaming was seen as an expensive toy, and I’m sure teenagers eventually ditched it as they wanted to seem “cool” with their friends and classmates. Atari hardware and software sales worsened through the mid-80s, and the brand’s power was dead by the end of the decade. In 1977, as the games industry started to pick up steam in the first big boom, an article was published by Michael Moon of the Tamba Bay Times. It said boldly that video games are a passing fad, an experiment like 3D glasses and other fads we’ve seen come and go. In 1983, Moon’s prediction seemed correct. At least… in North America.
The SO-CALLED Video Game Crash of 1983
When you bring up the Great Video Game Crash of 1983, you’ll instantly meet people who hate that term. I can tell you I AM one of those people. I and others have come to call it the “So-called” Video Game Crash. When you stop listening to all the noise, you’ll quickly realize how overhyped and just downright wrong some of the mythology of the crash is. So, let’s go through some other aspects of this so-called infamous crash.
The biggest aspect that is constantly ignored about the crash is the economy. 1982 and 1983 were horrible financial years for the United States. The country had entered two bad recessions almost back-to-back. It was dealing with inflation and oil shocks that makes today’s issues look like small potatoes. It got so bad that even mostly liked Ronald Reagan was being compared to Herbert Hoover during the 1982 midterms, and his party suffered as a result. Families weren’t just picking computers because they also covered games; they had to find ways to budget, and video games were not on the priority list as they were still seen as overpriced toys.
The crash was mostly in North America, specifically the United States. In fact, Japan and Europe had their own gaming revolutions happening at the same time. Europe took advantage of the home computer revolution to start its gaming history. Japan’s Nintendo had started developing their own home console with the already popular Game N’ Watch handheld systems doing well. Even in the States, it wasn’t everyone who got it. The arcade market continued to do well, only taking a small hit due to the economy. In fact, if we want to be more accurate, something did crash, but it wasn’t the industry – it was Atari.
The crash mostly centers around Atari. While it is true consoles were competing with them, Atari was a near monopoly of brand power. When Warner Communications bought them, the men who created the company began to be pushed out. Nolan Bushnell talked many times about regretting selling to Warner and was pushed out of the CEO role towards the end. Bushnell instead put his time and energy into creating Chuck E’ Cheese, mixing arcade cabinets with pizza, a perfect combo for families to enjoy. The new heads of the company got lazy and overconfident, E.T. and the deal with Spielberg broke the floodgates and exposed the mismanagement. With a failed next-gen console, a bad economy, no true competitor to pick up the pieces, overproduced cartridges, licensing nightmares, and the inability to plan for setbacks it was Atari, not the industry, that crashed in 1983. In what was believed to be an urban legend for decades, Atari went to the New Mexico desert and dumped over 700,000 Atari cartridges they couldn’t sell, many believing they were all the E.T. game. In 2014, a documentary released by Microsoft confirmed the legend as true when a months-long excavation was done and found the buried games. Only 1,000+ of the games were E.T. In 1985, Atari sold their arcade division to Japanese gaming giant Namco.
What Now?
By 1984, video games were not the hottest item on a kid’s holiday lists. In North America, the belief was that gaming was done for, at least for a while. However, things were changing elsewhere. The new success of personal home computers would lead to new games and new technologies in the industry. In Japan, Nintendo, the long-time cards and toy maker was dabbling in games. The success of Donkey Kong and the fortunate hiring of Shigeru Miyamoto had set the company on a new course. Hiroshi Yamauchi had decided that they would make their own cartridge-based console for Japan. It would be all hands on deck. The Family Computer System would begin development. His son-in-law would eventually be tasked with his toughest mission yet: sell what looked like a dead industry to Americans.
SOURCES
I would like to thank Wikipedia for many of the sources used. This includes the pages on E.T. the movie and game, the page on Atari and Atari 5200, the page on The Video Game Crash of 1983, and Gamerant.com for the viral article of Tampa Bay Times declaring video games as a fad.