The Video Game Crash of 1983

In my previous post, I discussed a short history of the video game industry up until 1983, when the major crash happened. This post, I'll dig a bit deeper into Atari's corporate downfall, and we'll discover how a company that was on top of the market could have possibly fallen so hard that it nearly took the entire industry with it.

In Depth: The World of 1983
During this time period, Atari was the name of the game, a company that seemed so destined to succeed that Warner Communications purchased it for $28 Million USD in 1976. Suddenly, however, in 1982, Atari began to slow down, reporting only a 10% to 15% increase in expected earnings, a shocking contrast to the 50% or more earnings that Wall Street speculators predicted. What could have possibly caused such a powerful company to slow down like this? Let's look over some probable causes:

• Poor employee treatment caused most of Atari's programmers to leave the company.
• Their consumer hardware was aging poorly, and the release of the Atari 5200 was ill received
• Atari's business model relied on game sales to make up for both the cost of game production   and the cost of system production

The departure of most of their good programmers resulted in less than flattering performance when Atari released a home version of Pac-Man in 1982. In an act of "it was a good idea at the time", Atari produced 12 million copies of Pac-Man even though only 10 million of their 2600 consoles (which Pac-Man was designed for) had been sold, hoping that the game would spur additional console sales. Sadly, this strategy didn't work out, and Atari only sold 7 million copies. Atari's next move lead to the production of arguably the most infamous game of all time: E.T. The Extra-Terrestrial.^[1]

ET: Extra Terrible
In August of 1982, Atari made a deal big enough to make it into the New York Times: they had secured the rights to make a video game from Steven Spielberg's hit movie E.T. The Extra-Terrestrial. Atari payed out somewhere between $20 and $25 million USD^[2] for the licensing rights, and the game was rushed through production on a tight schedule. Atari had high hopes for the game, and ordered for around 5 million copies to be produced. However, like Pac-Man before it, E.T.'s sales were less than impressive, and only earned Atari $25 million USD back. Atari was now left $200 million USD in debt, and E.T. was slammed by critics and players alike for its near unplayable state. While E.T. by itself was not what caused the crash, it has become the poster child for the crash, and is still one of the most notorious examples of awful game design ever.

Atari lost $536 million USD total^[3], and was eventually sold. Atari, who had once dominated the industry, had now hit rock bottom. Next post, we'll compare this information with the world of today.



References:
[1] Barbara and David P. Mikkelson, May 10, 2011: Snopes: Buried Atari Cartridges
[2] Nadia Oxford, September 21, 2011: IGN: Ten Facts about the Great Video Game Crash of '83
[3] Time Magazine, February 6, 1984: Time Magazine: The Zinger of Silicon Valley (1984)

The Industry in a Blink: a History of Video Games

In order to fully understand the state of the industry now, I feel that it is important to review the history of the video game industry to illustrate its growth, and to help us understand the trends of today.

Let's start by defining what I mean by "the video game industry":
- The series of producers and developers of video games, in respect to the home/personal consumer.

By definition, I will be excluding the arcades, and for the purpose of this blog, anything before the "First Generation". So let's get our brief history started:

1972
• January: Magnavox releases the Odyssey, the very first home video game console. It was an impressive feat, but its games weren't really what we consider games today, instead, they were more like TV assisted board games, relying on colorful plastic overlays to give rules and goals. Commercially, the Odyssey failed.^[1]

1975
• Christmas Season: Atari, in conjunction with Sears, produces Pong, which becomes a major hit, despite the poor sales of the Odyssey. Atari later reproduced Pong branded under their own name, instead of under the Sears brand.^[1]

1977
• Due to the popularity of Atari's Pong, other developers began to produce their own versions of Pong. With so much of the same, the developers of these Pong consoles began selling at a loss, and for the first time, the industry experienced a crash.^[2]

1983
• The industry was now an actual industry, and there were a variety of consoles on the market, the biggest names, of course, being Atari with their 2600 and 5200 systems, and the Colecovision, manufactured by Coleco.^[3] Today, the Atari 5200 is notorious for its poor design, and at the time, commanded a higher price than the average consumer wished to pay. The lack of sales combined with an overall lack of quality software caused the much larger crash of 1983.^[1]

This particular crash is important for a variety of reasons, number one on that list being that it was the direct result of the market being over saturated with games that, to quote Roy D'Silva, "...were low on quality, high on advertising products which tried to bank on the popularity wave of video game consoles." This important concept will be covered in my next blog post, which will be tomorrow (Friday, October 24).


References:
[1] Roy D'Silva: History of Home Video Game Consoles (Accessed on October 25, 2012)
[2] Michael Miller, April 1, 2005: A History of Home Video Game Consoles (Page 1)
[3] Michael Miller, April 1, 2005: A History of Home Video Game Consoles (Page 3)

Let's Get Down to Business (Practices)

Welcome to 2012, a world where video games are becoming more of a mainstream topic than ever. Video games, the complex time killers once seen as a fad are now, according to this slideshow, bigger than the movie industry. That's something to think about: people who have seen movies compared to people who have bought, or at the very least played, a video game. When it's presented like that, it's easy to realize that video games are becoming this generation's book, its movie, its medium of artistic expression and communication.

However, as great as the birth of this new art medium is, the video game industry is following what I believe to be a destructive pattern. Development costs are reaching ridiculous figures, and as the numbers rise, the industry seems to be struggling. Studio closures and layoffs are becoming a part of industry's nature, but why? To me, the answer to that question lies within the poor practice of increased costs that these development studios are involved in.

This blog intends to provide its readers with the most accurate information possible regarding the video game industry and the spending habits of various developers, with the addition of my own opinions, influenced by the years of video games I've played and the developments I've noticed in the industry over the years. I'll be making posts on the blog every Thursday (Friday if my schedule won't allow a Thursday post), United States CST.

As a side note, one of the aforementioned opinions I hold is that there is nothing more important to the video game industry than the consumers, and on this blog, the title of "consumer" has simply been changed to "reader". I value the comments and opinions of my readers, so please feel free to leave a comment; it could even become a topic of a future post!