The 'Shroom:Issue LVII/A History of Video Games

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A History of Video Games

by Toad85 (talk)
Hey everybody, it's Toad85! Welcome back to more "A History of Video Games!" In the last issue, we went over the rise of Atari and the birth of the Video Game Industry. In this episode... well just read it and find out.

The video game industry is one of the largest in the world these days. From big-buck consoles like the Wii and Playstation 3, to mobile devices like the 3DS and PSP, to games that you can even play on your smartphone. Games like Super Mario Galaxy, Angry Birds, and Call of Duty: Black Ops rake in millions of sales and billions of dollars. Dozens of gaming magazines, news articles, and websites (heck, even this one!) provide the latest news regarding your favorites. It would be unthinkable that this seemingly endless flow of money should end.

Well, that's just what Atari thought.
See, back in 1982, Atari was one of the fastest growing companies in America. Atari was the hub of the video game industry, and was raking in truckloads of dollars. Other companies like Mattel and Coleco soon jumped on the video game bandwagon. The future of video games was looking bright.
But then: the unthinkable happened. The video game industry came to a complete halt just the next year, leading to what is now known in gaming circles as the Video Game Crash of 1983.
How did this happen? How did a multimillion dollar industry just fall off its feet and flounder for two years straight? How did Atari, which was at one point a financial juggernaut, lose over five hundred million dollars by the end of that year? Read on and find out!!

Too many games

One of the biggest contributors to the crash was the lack of quality in the video game industry as of 1982/1983. Anyone at that time could make a video game, since Atari had no lock-out chip to keep unlicensed games away. Even companies like Quaker Oats and Purina Dog Food had games of their own. Because gamers didn’t have game review websites or gaming magazines to check if a game was actually good or not, they were often left in the dark on whether a game was worth buying or not (It was safe to assume “not”). While most of these new games were absolutely terrible, the two worst offenders came from Atari itself.
In late 1981, Atari finally acquired a licensed to make a port of Pac-Man (a popular arcade game, for those of you with amnesia). Not wanting to miss out on the holiday craze, Atari hired a programmer named Todd Frye, and requested that he port Pac-Man to the Atari 2600. Frye quickly developed a prototype to show Atari his work, but Atari decided to publish the prototype rather than wait for the game to be tested. Not only that, but Atari also decided to make 12 million copies of the game, more cartridges than Atari had consoles. Atari was so confident in the Pac-Man name, that they presumed that kids would buy a 2600 just to play Pac-Man.
When the game was released, it turned out to be a total disaster. It barely resembled the original, replacing power pellets with little rectangles (Seriously, Frye? You couldn’t make a circle?) and distorting Pac-Man and the ghosts beyond recognition. Despite being the best-selling Atari game of all time, with over 7 million cartridges sold, Atari lost millions of dollars on the 5 million that remained unsold. And since Frye got paid for every cartridge made, as opposed to sold, he didn’t care that it was a flop, because he got rich either way.

E.T. is a charming and successful Stephen Spielberg movie released in 1982, and Atari soon received a license to make E.T. a video game. Unfortunately, in order to get the game out in time for the holidays, Atari had to develop, test, publish, and market a completely new video game in only six weeks. Yes, you heard me right: SIX WEEKS. Atari, learning zilch from their Pac-Man escapade, figured that E.T. would become a hit, merely because of the title. Well, gamers know a bad game when they smell one, and E.T. had the worst reek of them all. No sane person liked the game, not even the developers. Going into 1983, Atari had lost over five hundred million dollars. These bad games made gamers lose confidence in Atari and the video game industry in general.

Other Consoles and PCs

Atari had never had a firm monopoly of the gaming industry, but it had always been like cream; always on top. However, by the early 1980s, several new consoles started appearing on the market. Soon enough, gamers were playing with systems like the Mattel Intellivision, the Colecovision, the Fairchild Channel F, the Magnavox Oddysey 2, the Emerson Arcadia 2001, and the Vectrex. Some companies, Atari for instance, even had two consoles on the market at the same time! Not only that, but most of the consoles had ‘’interchangeable hardware’’. For example, the Colecovision had an extension pack upon which you could play Atari 2600 games. Imagine if you could play PS3 games like that on your Wii!
This flood of consoles confused buyers, and ultimately helped decrease each other in value. But new consoles weren't the only thing competing for gamers' attention.
Today, we often use computers for gaming. Games like Minecraft, FarmVille, and Plants vs. Zombies all are available to play on home computers. But, back in 1983, personal computers were a serious threat to console sales. PCs often had superior sound, graphics, and depth over consoles, and could be used for many other uses as well. PC manufacturers like Commodore clamored “why buy just a video game,” and promised users much more than a console ever could. Many families figured that owning a PC was a better investment than owning a home console. This no doubt put a slow to home console sales.

Unlicensed Games

Back when Atari was one of the biggest cheeses on the market, they outright refused to give credit to game developers, instead wanting customers as viewing “Atari” as making their product. A number of outraged developers quit Atari and created Activision, the first American third-party game developer, and released their first game: Pitfall. Atari saw Activision as a menace, even suing Activision on grounds of industrial espionage (and losing), but soon enough other third-party developers started emerging, all wanting to release their own games. This flooded the video game market past what it already was, and since Atari had no lock-out chip or means to prevent unlicensed games from being played on their system, virtually anyone with money and programming skill could make a game.
The main problem with all of these new developers was that the console manufacturers got no royalty for third-party games. First-party companies sold their console for cheap, hoping to make back their money through software sales. Third-parties changed all that, and first-parties started losing money.

In conclusion…

While there were many factors contributing to the North American Video Game Crash of 1983, it is all but too clear what happened next. Atari, at a December 1982 meeting, announced that, because of all these detracting factors, they expected to only… grow by 10% to 15%. Which is by no means bad, until you remember that Atari had previously stated that they expected to grow by 50%. This took a big blow out of the industry, and thus began the crash. Stock collapsed. Game sales dwindled. Wall St. declared the console industry virtually dead.
What, however, actually happened during the crash? Well, tune in next issue to find out!