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Speaker 1: Welcome to Tech Stuff, a production from I Heart Radio.

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Speaker 1: Hey there, and welcome to tech Stuff. I'm your host,

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Speaker 1: Jonathan Strickland. I'm an executive producer with I Heart Radio.

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Speaker 1: It all love all things tech, and you know, back

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Speaker 1: in two, Chris Pallette, my original co host, and I

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Speaker 1: did a short episode about the video game crash of

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Speaker 1: nineteen eighty three. But I think we fell into some

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Speaker 1: traps that a lot of people fall into when they

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Speaker 1: talk about that, and I figured that we could probably

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Speaker 1: go back to a deeper dive in this episode and

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Speaker 1: learn about how that all happened. Now, the super short

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Speaker 1: version of the story is that here in the United States,

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Speaker 1: the home video game market went into a recession after

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Speaker 1: it became oversaturated. It was built on a faulty business model,

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Speaker 1: really a faulty distribution mode atle which we'll talk about.

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Speaker 1: Investors lost confidence in the companies involved, and the entire industry,

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Speaker 1: mostly concentrated in a single company, collapsed under its own weight. Now,

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Speaker 1: some people given even shorter version, effectively blaming a pair

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Speaker 1: of Atari cartridges for the whole thing. But as we'll see,

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Speaker 1: that ends up being a little bit reductive, but seemed

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Speaker 1: like it would have been a great year for games.

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Speaker 1: I mean, if you look at the arcades, Dragons Layer

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Speaker 1: and Space Ace, both video games with full hand drawn

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Speaker 1: animation from Don Bluth stored on laser disc. They made

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Speaker 1: a big splash that year. This was despite the fact

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Speaker 1: that player interaction in those games is just limited to

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Speaker 1: responding to timed events and pushing on a joystick in

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Speaker 1: a particular direction or hitting a button. Um, but you're

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Speaker 1: not controlling animated characters the entire time. It's literally like, oh,

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Speaker 1: the screen flash to push left. Uh. The Star Wars

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Speaker 1: Arcade Machine also came out in nineteen eighty three. That

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Speaker 1: one had vector color graphics and lines from the movie.

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Speaker 1: By the way, that game remains one of my favorite

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Speaker 1: arcade games of all time. Likewise, Spy Hunter another game

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Speaker 1: that I consider a top arcade game of all time.

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Speaker 1: That one came out in nineteen eighty three. That's the

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Speaker 1: game where you control a car. You have an overhead

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Speaker 1: view you're controlling of cars that goes down the highway

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Speaker 1: and the car's got like all these spy gadgets kidded

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Speaker 1: out into it, or it can get them by you know,

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Speaker 1: docking with a a U a semitruck that's also on

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Speaker 1: the road and you have to shoot bad guys and stuff.

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Speaker 1: Super cool game. And a lot of other big titles

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Speaker 1: came out that year, like Discs of Tron, Elevator Action,

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Speaker 1: Junior pac Man, and Crawl. Okay, so that last one

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Speaker 1: wasn't exactly a class arcade game, but it was an

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Speaker 1: arcade die in with a science fiction fantasy film that

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Speaker 1: I've got a soft spot for. All Right, So we

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Speaker 1: can't just jump into nine or even nineteen eighty and

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Speaker 1: expect to have a full understanding of what led to

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Speaker 1: the industry crash. We really need to understand how this

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Speaker 1: all got started in the first place. So we're gonna

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Speaker 1: do a quick overview of the birth and evolution of

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Speaker 1: video games, both for home consoles and for the arcades,

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Speaker 1: because they are tied together somewhat um And also, arcades

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Speaker 1: were a thing too once upon a time, just in

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Speaker 1: case you weren't aware. I mean, there are some arcades

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Speaker 1: still in existence, particularly outside the United States, and you've

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Speaker 1: got your stuff like David Busters and whatever, but it's

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Speaker 1: not like the old days insert old time and music here. Now.

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Speaker 1: Before even the old days, there was a physicist named

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Speaker 1: William Higginbotham uh, and this cat was an interesting fellow.

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Speaker 1: For one thing, he was a scientist at the Los

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Speaker 1: Alamos National Laboratory during World War Two and was part

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Speaker 1: of the group that developed the atomic bomb. He worked

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Speaker 1: on the electronic side of things, you know, rather than

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Speaker 1: the stuff what goes boom side of things. But of

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Speaker 1: course all these groups were working together with a common

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Speaker 1: goal in mind. Anyway, he was part of the team

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Speaker 1: that brought upon us the era of nuclear weapons. He

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Speaker 1: also campaigned hard for the world to you know, not

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Speaker 1: go ham on nuclear weapons and build them all over

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Speaker 1: the place. Also, I should point out that it's not

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Speaker 1: like the United States was the only country working toward

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Speaker 1: nuclear weapons. And I don't mean to suggest that if

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Speaker 1: the US hadn't developed the atomic bomb, no one else

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Speaker 1: would have done it. Uh, that surely would have happened.

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Speaker 1: It's just that's how history played out, all right. So

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Speaker 1: let's get back to the video games, though. So Hagin

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Speaker 1: Botham goes to work for the brook Haveven National Laboratory

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Speaker 1: after the war, and he worked in a department called Instrumentation,

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Speaker 1: and this department built various cathode ray tube or CRT

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Speaker 1: displays intended for radar systems. Well, in ninete fifty eight,

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Speaker 1: he's told he's gonna create an exhibit to show off

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Speaker 1: to people whenever they're touring the lab. And he's like,

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Speaker 1: we use systems to display stuff on screens. It's not

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Speaker 1: very exciting. I mean, it's radar systems, and unless you've

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Speaker 1: got something to pick up, it's you're just looking at

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Speaker 1: a screen. So he gets an idea. See, the team

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Speaker 1: was using oscilloscopes, and oscilloscopes are used to display wave

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Speaker 1: forms of various signals. So when a scilloscope can show

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Speaker 1: stuff like a signal's frequency and amplitude, among other things,

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Speaker 1: and most importantly for this podcast, it can plot curved lines.

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Speaker 1: And when paired with an analog computer that Higginbotham's department had,

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Speaker 1: it gave the physicist a chance to design a very

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Speaker 1: simple tennis game. A technician named Robert Davorak took Higginbotham's

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Speaker 1: plans and built the exhibit, and Higginbotham called it Tennis

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Speaker 1: for two. This was in nineteen fifty eight. That's more

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Speaker 1: than a decade before we'd see a refined version of

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Speaker 1: this called Pong. But the game was different from pong

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Speaker 1: in other ways, as well, so pong uses a top

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Speaker 1: down view. For the table tennis game, players take control

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Speaker 1: of bars that act kind of like paddles or rackets.

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Speaker 1: Typically they're taking control on the left and right sides

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Speaker 1: of the screen, and it's like you're looking down on

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Speaker 1: top of a of a table tennis board and you

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Speaker 1: you move these these bars, these paddles up and down

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Speaker 1: the screen on your side in order to hit a

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Speaker 1: ball back and forth. When the ball encounters either the

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Speaker 1: top or bottom edge of the screen, it bounces off

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Speaker 1: and heads towards you know, whichever direction it was going.

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Speaker 1: But Tennis for two only had two lines in It

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Speaker 1: had a line along the bottom of the screen which

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Speaker 1: represented the ground, and halfway across the length of this

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Speaker 1: line was a short vertical line extending up, so this

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Speaker 1: represented the net. So it's like you're looking at a

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Speaker 1: tennis court in profile. Players had a dial which allowed

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Speaker 1: them to set the angle of the ball, and then

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Speaker 1: a butt and you would push the button when the

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Speaker 1: ball entered your side of the court, and you would

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Speaker 1: use the dial to set the angle of your strike.

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Speaker 1: There were no paddles or anything like that on the screen.

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Speaker 1: Higginbotham didn't really do anything else with this idea. It

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Speaker 1: was just kind of to demonstrate the technology, and even

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Speaker 1: though it got a lot of attention, he didn't really

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Speaker 1: see any application for it beyond that. Now you could

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Speaker 1: argue this was the first video game, but it was

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Speaker 1: never a commercial product. But flash forward to the nineteen sixties.

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Speaker 1: An engineer named Ralph Bear was working for a company

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Speaker 1: called Sanders Associates, Incorporated. He was exploring how the company

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Speaker 1: might make a companion technology for the television, which had

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Speaker 1: proven to be quite popular by the nineteen sixties. So

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Speaker 1: the idea was that most folks already had a TV,

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Speaker 1: and so creating something that could expand the capabilities of

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Speaker 1: a TV would tap into a pre existing market, a

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Speaker 1: market that already was proven to have spent money on

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Speaker 1: a appliance as expensive as a television. So there and

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Speaker 1: two bills, Bill Rush and Bill Harrison began developing a

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Speaker 1: box you could connect to a television that would allow

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Speaker 1: you to play games on the TV. And the engineers

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Speaker 1: built a few prototypes, and we typically referred to them

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Speaker 1: as the brown boxes because they were covered in a

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Speaker 1: veneer that made them look like they were made out

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Speaker 1: of wood. They created a version of table tennis that

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Speaker 1: used controllers with three knobs and a button on them.

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Speaker 1: The knobs or dials controlled the paddles and the ball

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Speaker 1: itself in fact, so one dial was to control the

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Speaker 1: horizontal movement of a paddle. And remember this is a

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Speaker 1: table tennis that you're looking at either the left side

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Speaker 1: or the right side of the screen, So by controlling

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Speaker 1: your horizontal movement, you can move closer to or further

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Speaker 1: away from the net in the center or the center line.

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Speaker 1: And then the second dial controlled the vertical movement of

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Speaker 1: the paddle, so that lets you move up and down

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Speaker 1: in order to intercept the ball before it would pass

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Speaker 1: you and go beyond your side. And then the third

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Speaker 1: dial would actually control the movement of the ball itself,

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Speaker 1: so once your paddle had hit the ball, you could

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Speaker 1: use this third dial to put quote unquote English on

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Speaker 1: the ball after you'd already hit it. So not really realistic,

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Speaker 1: but you can control the path of the ball by

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Speaker 1: turning this dial, so you can make it go up

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Speaker 1: or down, or you can make it go up and

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Speaker 1: down really fast as you're heading towards the other side,

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Speaker 1: in an effort to make sure your opponent can't hit it.

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Speaker 1: So you could actually skew the direction of the ball

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Speaker 1: as it left your paddle. If your opponent managed to

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Speaker 1: hit the ball well, then you would no longer be

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Speaker 1: able to control its movement. You wouldn't want to anyway,

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Speaker 1: because you would be, you know, focusing too much on

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Speaker 1: trying to make sure you move your paddle in the

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Speaker 1: right spot to intercept the returning ball. So Sanders Associates

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Speaker 1: filed a patent on this design and got it, and

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Speaker 1: they looked for buyers, and a company called Magnavox, that's

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Speaker 1: a company I should cover in depth at some point

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Speaker 1: licensed this design in nine and began working on a

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Speaker 1: consumer version of the prototype technology. And this would become

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Speaker 1: the first Magnavox Odyssey console, which essentially played table tennis

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Speaker 1: without being able to keep score. That you had to

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Speaker 1: keep score, you know, on your own. Uh. The Magnavox

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Speaker 1: Odyssey came out in September nineteen seventy two. The console

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Speaker 1: could accept game cards. These were printed circuit boards that

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Speaker 1: were kind of like a proto cartridge. UH. The cards

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Speaker 1: modified how the console would send signals to a television

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Speaker 1: and how it would interpret inputs, which gave the players

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Speaker 1: a few different game types that were all mostly based

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Speaker 1: off of table tennis. Magnavox even created the first video

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Speaker 1: game console peripheral. For an extra charge, you could buy

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Speaker 1: a light gun that you could use with some basic

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Speaker 1: shooting games. Again, um, just like you know, they would

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Speaker 1: display a white square in your TV and you would

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Speaker 1: aim the light gun to it, pull the trigger, and

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Speaker 1: if it had detected that the white square was in

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Speaker 1: the sight of the gun, then it counted as a hit. Well,

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Speaker 1: the Odyssey would enjoy some modest success. Some would say

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Speaker 1: it was actually a failure. It would eventually sell around

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Speaker 1: three units when all of a sudden done, but early

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Speaker 1: on it wasn't making that much of an impact, except

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Speaker 1: it would have a huge impact on the history of

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Speaker 1: video games, just not necessarily on the consumer market right

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Speaker 1: off the go, because one person who saw the Magnavox

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Speaker 1: Odyssey and Action was Nolan Bushnell. Now Bushnell and his

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Speaker 1: partner Ted Dabney had created the first arcade video game

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Speaker 1: in nine under a company that was called Scissor G.

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Speaker 1: And this arcade game was called Computer Space, And in turn,

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Speaker 1: this was based off a game that had been created

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Speaker 1: by folks at M I T way back in nineteen

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Speaker 1: sixty two. Called Space War. Now I emphasized that title

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Speaker 1: because the actual title has an exclamation point after the

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Speaker 1: word space War. Anyway, computer Space was largely an adaptation

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Speaker 1: of Space War, and it would become the first commercial

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Speaker 1: arcade game, but it wasn't particularly successful. However, Bushnell thought

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Speaker 1: there's gonna be a big business in video games, and

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Speaker 1: so he was convinced that they needed to stick with

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Speaker 1: this kind of this market. So he goes off and

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Speaker 1: then found the company Atari, specifically with the goal of

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Speaker 1: creating games that the company would then license to manufacturers.

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Speaker 1: So the original idea was that Atari would create the

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Speaker 1: i P and would program a game, but then effectively

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Speaker 1: sell that design to some established gaming company like Bally

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Speaker 1: or Williams. Bushnell hired on an engineer named Alan Alcorn. Now,

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Speaker 1: the video game world is really young at this point,

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Speaker 1: like pretty much the only people who have made any

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Speaker 1: games were engineers and programmers who are really just trying

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Speaker 1: to create fun ways to misuse company or research lab

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Speaker 1: or university property. Like, they weren't games for the general public.

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Speaker 1: They were typically making games for themselves and for the

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Speaker 1: folks who worked closely with them. And Alcorn had no

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Speaker 1: experience in creating games. So Bushnell decided to give him

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Speaker 1: the assignment of making a table tennis game similar to

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Speaker 1: the Magnavox Odyssey home console game, but this time in

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Speaker 1: arcade format, so not a home console, but like an

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Speaker 1: arcade cabinet that you would encounter in a place like

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Speaker 1: a theater or a bar, because this isn't the time

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Speaker 1: before arcades themselves, so this was kind of like a

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Speaker 1: programming exercise for Alcorn. So Alcorn pretty much reinvents the

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Speaker 1: table tennis game we saw with the Magnavox Odyssey, which

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Speaker 1: again Bushnell had actually had a chance to see in

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Speaker 1: person before it was released, and Uh and Pong would

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Speaker 1: be the result of this. He created an interesting variation

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Speaker 1: on this table tennis game. For one thing, it could

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Speaker 1: keep score so you didn't have remember it. For another,

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Speaker 1: he went so far as to program the little bars

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Speaker 1: that act like your paddles or your your rackets. They

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Speaker 1: actually have computationally different angled surfaces along the front of

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Speaker 1: the bar. So that's just mathematics at this point. So

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Speaker 1: by that, I mean if you were to look at them,

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Speaker 1: they would be rectangular, right they don't. They wouldn't look angular.

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Speaker 1: They're just the rectangles but mathematically there are different sections

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Speaker 1: of the bar that act like a slightly different angle

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Speaker 1: of attack of a paddle. So if you hit the

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Speaker 1: ball smack dab in the middle of your um, your

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Speaker 1: your paddle, you would have a pretty simple deflection. If

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Speaker 1: it was coming straight at you and you hit it

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Speaker 1: right dead in the center, it would go straight back um.

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Speaker 1: If it was coming at an angle, then it would

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Speaker 1: bounce off at a ninety degree angle deflection. But if

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Speaker 1: it hit other parts of the bar, like toward the end,

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Speaker 1: they would have a more severe deflection, a sharper angle.

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Speaker 1: So where you hit the ball with your paddle would

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Speaker 1: change the way the ball flew back towards your opponent.

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Speaker 1: It was neat that he was able to mathematically do

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Speaker 1: this anyway. Atari would choose to manufacture pong itself rather

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Speaker 1: than license it to some other company. There's this whole

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Speaker 1: story about how Atari had approached a couple of different

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Speaker 1: companies about the possibility of making pong and then told

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Speaker 1: each of the companies, Hey, it turns out the other

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Speaker 1: guys aren't interested in making this for us, which then

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Speaker 1: discouraged the company. So they backed out that that was

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Speaker 1: Atri's plan because they wanted to make it themselves, but

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Speaker 1: they first had to get out of this commitment that

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Speaker 1: they were going to make it for some other company.

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Speaker 1: So they did that. They went out and they got

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Speaker 1: a line of credit in order to produce this. Because

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Speaker 1: Atari was still a very young company, didn't have a

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Speaker 1: lot of money, and manufacturing an arcade machine is expensive.

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Speaker 1: You have to go through the whole manufacturing process, so

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Speaker 1: this was a big risk, but it paid off. Pong

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Speaker 1: would become the first commercially successful arcade game. It would

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Speaker 1: also prompt Magnavox to sue Atari for patent infringement, saying, hey,

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Speaker 1: we paid for this patent and you clearly have copied it,

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Speaker 1: so what's up with that. This lawsuit would eventually get

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Speaker 1: settled out of court. Now, Atari would subsequently make its

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Speaker 1: own table tennis video game console, which it called, fittingly enough,

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Speaker 1: Home Pong. They released that console in the original Odyssey

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Speaker 1: had been on the market for a few years at

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Speaker 1: that point, and Atari would sell around a hundred fifties

288
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Speaker 1: thousand units all told, so, you know, still not a

289
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Speaker 1: huge number in the grand scheme of things. Now, Pong

290
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Speaker 1: the arcade game was wildly successful, and you can kind

291
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Speaker 1: of understand why I mean, the game is simple, so

292
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Speaker 1: it's really easy to understand how to play, unlike say

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Speaker 1: Computer Space, which was notoriously complicated. It only costs to

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Speaker 1: play Pong for a session, whereas home consoles were upwards

295
00:17:03,000 --> 00:17:06,040
Speaker 1: of a hundred dollars, and when we adjust for inflation,

296
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Speaker 1: that's around the same as six hundred twenty bucks today.

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Speaker 1: So while the home consoles were moving okay, the arcade

298
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Speaker 1: was doing a little bit better. Between nineteen seventy two

299
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Speaker 1: and nineteen seventy seven, pretty much all the video game

300
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Speaker 1: home consoles were focused mainly on table tennis, are games

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Speaker 1: that were very slight variations on table tennis, So in

302
00:17:27,520 --> 00:17:31,520
Speaker 1: other words, everything was Pong pretty much like it may

303
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Speaker 1: not be called Pong because that was an Atari thing,

304
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Speaker 1: but they were all essentially Pong. So there were numerous

305
00:17:37,440 --> 00:17:40,919
Speaker 1: copycats out there, and there was a massive oversaturation of

306
00:17:41,040 --> 00:17:44,760
Speaker 1: first generation consoles, and they pretty much all played Pong

307
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Speaker 1: or some variation of that, and by nineteen seventy seven

308
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Speaker 1: that had all played out. Dozens of companies that had

309
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Speaker 1: jumped into the market in an effort to cash in

310
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Speaker 1: on what was seen as a craze found themselves over

311
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Speaker 1: extended and many of them would go out of business,

312
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Speaker 1: and it was a tough sell. I mean, a lot

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Speaker 1: of folks who were interested in video table tennis had

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Speaker 1: already bought a console, and since all the consoles offered

315
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Speaker 1: more or less what wasn't a largely identical experience, there

316
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Speaker 1: wasn't much reason to go out and buy another one. Right,

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Speaker 1: you already have a Pong machine. You don't need another one,

318
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Speaker 1: So why would you shell out a hundred dollars or

319
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Speaker 1: more to buy something that you essentially already have. So

320
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Speaker 1: the arcade game business wasn't in much better shape at

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Speaker 1: this point. While Pong had been a high point in

322
00:18:29,560 --> 00:18:33,480
Speaker 1: the arcade industry, there was a real lag and innovation

323
00:18:33,560 --> 00:18:37,840
Speaker 1: in the arcade space, and so the whole industry, consoles

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Speaker 1: and arcade went into a bit of a recession. In

325
00:18:41,280 --> 00:18:44,080
Speaker 1: by in the night a game would come out that

326
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Speaker 1: would breathe new life into the arcade industry and later

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Speaker 1: on into the home video game market. We'll find out

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Speaker 1: which game that was when we come back from this

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Speaker 1: short break. Okay. So there was this early glut of

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Speaker 1: table tennis based video game consoles in the early to

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Speaker 1: mid seventies, and that market ultimately collapsed By the time

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Speaker 1: the dust had cleared, only a few companies were still

333
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Speaker 1: in that market. Atari was one of them. Atari had

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00:19:18,600 --> 00:19:22,119
Speaker 1: continued making arcade machines as well as some consoles and

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00:19:22,200 --> 00:19:25,639
Speaker 1: handheld devices as well. You probably wouldn't be surprised to

336
00:19:25,720 --> 00:19:27,639
Speaker 1: learn that a lot of those still remained kind of

337
00:19:27,760 --> 00:19:31,080
Speaker 1: Pong inspired, because that game had been such a big

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Speaker 1: success for Atari. It was something that the company was

339
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Speaker 1: leaning on. Some of the other titles that were uh

340
00:19:36,800 --> 00:19:40,080
Speaker 1: the Atari was producing we're racing game titles. They had

341
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Speaker 1: a couple of military games, like some games where you

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Speaker 1: would control a tank or a jet fighter game. Also,

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Speaker 1: in nineteen seventy six, Bushnell made a deal to sell

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Speaker 1: Atari to Warner Communications, and he stayed on for a

345
00:19:52,560 --> 00:19:56,879
Speaker 1: short while anyway, to continue to lead Atari. But lots

346
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Speaker 1: of other companies that tried to cash in on the

347
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Speaker 1: video tape old tennis trend. We're not so fortunate. And

348
00:20:02,720 --> 00:20:05,359
Speaker 1: once the market was saturated, you know, once pretty much

349
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Speaker 1: all the folks who one of one of these things

350
00:20:07,040 --> 00:20:09,840
Speaker 1: had one, there was nowhere to go. Plus, the second

351
00:20:09,840 --> 00:20:12,479
Speaker 1: generation of consoles were beginning to come out, and that

352
00:20:12,560 --> 00:20:15,320
Speaker 1: was the real nail in the coffin, and a big

353
00:20:15,400 --> 00:20:20,119
Speaker 1: change with these consoles is that these were predominantly cartridge based.

354
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Speaker 1: So instead of hardwiring games into the console itself, where

355
00:20:25,440 --> 00:20:28,359
Speaker 1: the console is limited to which every games were programmed

356
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Speaker 1: onto the the actual circuit boards of the console. Programmers

357
00:20:33,040 --> 00:20:36,000
Speaker 1: were designing games that a company would print onto a

358
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Speaker 1: circuit board that was housed inside a cartridge. You would

359
00:20:38,880 --> 00:20:42,639
Speaker 1: plug the cartridge into a console and the console could

360
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Speaker 1: run the game. So this was kind of like if

361
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Speaker 1: you were actually physically switching out part of a circuit

362
00:20:48,359 --> 00:20:51,120
Speaker 1: board in the console every time you were playing a game.

363
00:20:51,160 --> 00:20:53,760
Speaker 1: That's effectively what you were doing. The games were all

364
00:20:53,800 --> 00:20:58,000
Speaker 1: written in ROM format. ROM stands for read only memory.

365
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Speaker 1: That means that a machine can only pull from the

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Speaker 1: data that's stored on that cartridge. It cannot change or

367
00:21:05,720 --> 00:21:09,520
Speaker 1: overwrite that data. RAM memory is non volatile, meaning the

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00:21:09,560 --> 00:21:11,879
Speaker 1: game would always exist on that cartridge unless you were

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Speaker 1: to actually physically damage the cartridge itself. It's it is

370
00:21:15,280 --> 00:21:20,720
Speaker 1: a physical program on a circuit board. Now, this switch

371
00:21:20,840 --> 00:21:23,760
Speaker 1: to cartridges allowed companies to make consoles that could run

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Speaker 1: any number of games. You just had to program it

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Speaker 1: onto a ROM and have that housed in a cartridge

374
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Speaker 1: and have it be compatible with the machine. Then you

375
00:21:32,680 --> 00:21:35,240
Speaker 1: were off to the races. And in the beginning, each

376
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Speaker 1: company making a console had its own game titles, like

377
00:21:38,760 --> 00:21:41,520
Speaker 1: they were producing their own games. So a few of

378
00:21:41,560 --> 00:21:43,680
Speaker 1: the big consoles to come out around that time, where

379
00:21:43,680 --> 00:21:46,600
Speaker 1: the Callika Vision it was actually one of the later ones,

380
00:21:47,000 --> 00:21:51,359
Speaker 1: Mattel's in television, the Magnavox Odyssey to which was a

381
00:21:51,400 --> 00:21:55,439
Speaker 1: cartridge based game console, and of course the giant in

382
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Speaker 1: the space, the Atari Video Computer System or VCS, better

383
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Speaker 1: known to me at least as the Atari twenty hundred.

384
00:22:04,480 --> 00:22:07,920
Speaker 1: Now there were other consoles as well. Um. In fact,

385
00:22:08,040 --> 00:22:11,040
Speaker 1: sometimes people cite that as one of the reasons for

386
00:22:11,119 --> 00:22:13,920
Speaker 1: the video game crash, as we'll learn not so much.

387
00:22:14,680 --> 00:22:18,120
Speaker 1: And really these four consoles were the most popular by far,

388
00:22:18,280 --> 00:22:22,560
Speaker 1: and the Attori twenty hundred commanded the overwhelming share of

389
00:22:22,600 --> 00:22:26,760
Speaker 1: the market. Um depending upon which source you look at,

390
00:22:27,119 --> 00:22:30,479
Speaker 1: Atari would ultimately sell between twenty five million and thirty

391
00:22:30,560 --> 00:22:37,000
Speaker 1: million at twenty units. So that's a lot, especially when

392
00:22:37,040 --> 00:22:40,800
Speaker 1: you look at second place in television, which depending upon

393
00:22:41,240 --> 00:22:43,760
Speaker 1: which source you're looking at, sold between two and three

394
00:22:43,840 --> 00:22:47,520
Speaker 1: million units, so twenty to thirty million units for they

395
00:22:48,320 --> 00:22:51,639
Speaker 1: two to three million for second place, which was in television.

396
00:22:52,800 --> 00:22:57,160
Speaker 1: Atari was the home video game market in in many

397
00:22:57,240 --> 00:22:59,560
Speaker 1: respects Now, I should also add that the Atari twenty

398
00:22:59,560 --> 00:23:02,119
Speaker 1: six it came out a year before The Odyssey to,

399
00:23:02,720 --> 00:23:06,199
Speaker 1: two years before in television, and five years before the

400
00:23:06,200 --> 00:23:08,800
Speaker 1: Collique of Vision, so it really had a head start

401
00:23:08,840 --> 00:23:11,600
Speaker 1: in the market when you compare it to the others. Now,

402
00:23:11,600 --> 00:23:16,199
Speaker 1: the sold okay at launch. It didn't. It didn't do

403
00:23:16,320 --> 00:23:20,359
Speaker 1: badly when it debuted in ninety seven, but it also

404
00:23:20,560 --> 00:23:23,600
Speaker 1: was not a runaway hit. It wasn't like a viral

405
00:23:23,720 --> 00:23:28,160
Speaker 1: marketing sensation. It retailed for just under two hundred dollars,

406
00:23:28,200 --> 00:23:30,320
Speaker 1: so when you adjust that for inflation, it would be

407
00:23:30,359 --> 00:23:33,280
Speaker 1: more than eight hundred bucks today. So when you look

408
00:23:33,320 --> 00:23:35,280
Speaker 1: at a console and you see that's like six hundred

409
00:23:35,280 --> 00:23:37,639
Speaker 1: dollars and you think, wow, that's expensive, keep in mind

410
00:23:38,040 --> 00:23:42,359
Speaker 1: the Atari twenty hundred when it first debuted was sold

411
00:23:42,400 --> 00:23:45,479
Speaker 1: for the equivalent of eight hundred dollars today. And I

412
00:23:45,560 --> 00:23:47,400
Speaker 1: had one of these things, and I think about how

413
00:23:47,480 --> 00:23:49,600
Speaker 1: much my parents must have had to save to give

414
00:23:49,640 --> 00:23:52,600
Speaker 1: me that. Now, granted I got mine a little later

415
00:23:52,600 --> 00:23:54,840
Speaker 1: in the life cycle, it probably wasn't sold at the

416
00:23:54,880 --> 00:23:59,920
Speaker 1: full two d dollars. But still my parents were teachers. Anyway,

417
00:24:00,280 --> 00:24:03,600
Speaker 1: I don't mean to turn this into a Jonathan realizes

418
00:24:03,600 --> 00:24:07,760
Speaker 1: how many sacrifices as parents made podcast. It was expensive

419
00:24:08,000 --> 00:24:12,240
Speaker 1: and despite the cartridge approach providing you know, way more

420
00:24:12,280 --> 00:24:15,600
Speaker 1: options than what you would find with first generation consoles,

421
00:24:15,840 --> 00:24:17,320
Speaker 1: it was a bit of a slow burn. I mean

422
00:24:17,359 --> 00:24:19,960
Speaker 1: you had to remember also that this was this required

423
00:24:20,000 --> 00:24:23,960
Speaker 1: a change in consumer thinking, right because consumers before, yeah,

424
00:24:24,000 --> 00:24:27,120
Speaker 1: they were limited to whatever games were hardwired on a console,

425
00:24:27,440 --> 00:24:29,440
Speaker 1: but they didn't have any other purchases to make once

426
00:24:29,480 --> 00:24:32,000
Speaker 1: they bought the console, unless they were getting a peripheral

427
00:24:32,680 --> 00:24:35,879
Speaker 1: that everything was in the box. But with this model,

428
00:24:36,560 --> 00:24:39,399
Speaker 1: you bought the system, but then you had to buy games.

429
00:24:39,440 --> 00:24:42,240
Speaker 1: You know, you had additional purchase costs on top of

430
00:24:42,280 --> 00:24:45,919
Speaker 1: the system itself. Now, before the break, I alluded to

431
00:24:45,960 --> 00:24:49,119
Speaker 1: an arcade game that would revive the arcade industry and

432
00:24:49,160 --> 00:24:53,159
Speaker 1: subsequently really put a spark in the home video game market.

433
00:24:53,720 --> 00:24:57,200
Speaker 1: That game came from a Japanese company called Tito, and

434
00:24:57,359 --> 00:25:00,400
Speaker 1: it was a little game called Space and eight Ers.

435
00:25:01,320 --> 00:25:04,080
Speaker 1: This game came out for the arcades in nineteen seventy eight,

436
00:25:04,119 --> 00:25:08,679
Speaker 1: so the year after the VCS or came out and

437
00:25:08,760 --> 00:25:12,480
Speaker 1: it was a huge hit. And in the game, you

438
00:25:12,560 --> 00:25:15,119
Speaker 1: just you shoot down blocks of aliens that are flying

439
00:25:15,160 --> 00:25:18,720
Speaker 1: overhead and they scroll left and right, and they dropped

440
00:25:18,720 --> 00:25:20,680
Speaker 1: down a line. Each time they get to the edge

441
00:25:20,680 --> 00:25:24,320
Speaker 1: of a screen, they descend towards you. It's pretty simple game,

442
00:25:24,520 --> 00:25:28,399
Speaker 1: but it became an instant classic. Now the folks that Attari,

443
00:25:28,520 --> 00:25:31,560
Speaker 1: we're paying attention, not Bushnell. At this point he had

444
00:25:31,600 --> 00:25:37,720
Speaker 1: actually either been fired or he quit in nine. How

445
00:25:37,760 --> 00:25:41,040
Speaker 1: that unfolded really depends upon whom you ask, because different

446
00:25:41,040 --> 00:25:45,000
Speaker 1: people have a different explanation for that. And Atari engineers

447
00:25:45,080 --> 00:25:47,639
Speaker 1: were working on what was supposed to come after the

448
00:25:47,680 --> 00:25:52,040
Speaker 1: Atred because when the company first launched the console in nineteen,

449
00:25:53,160 --> 00:25:55,840
Speaker 1: they did it with a plan to replace it with

450
00:25:55,920 --> 00:25:59,000
Speaker 1: a newer piece of hardware within three years. So like

451
00:25:59,119 --> 00:26:03,800
Speaker 1: when they launched seventy seven, they thought, in eight, we're

452
00:26:03,800 --> 00:26:06,760
Speaker 1: going to come out with the next generation of this

453
00:26:06,920 --> 00:26:10,560
Speaker 1: hardware and it will be more powerful and have more capabilities.

454
00:26:10,920 --> 00:26:14,240
Speaker 1: But things would not work out that way, seeing in

455
00:26:14,800 --> 00:26:20,879
Speaker 1: eight Atari published a port of Space Invaders, a pretty

456
00:26:20,920 --> 00:26:23,520
Speaker 1: decent port, and it would go on to become the

457
00:26:23,600 --> 00:26:28,280
Speaker 1: second most popular AT twenty game in its history. We'll

458
00:26:28,280 --> 00:26:31,640
Speaker 1: talk about what was number one a little bit later. Now,

459
00:26:31,680 --> 00:26:34,600
Speaker 1: people were eager to have the experience of playing Space

460
00:26:34,640 --> 00:26:36,960
Speaker 1: Invaders at home. I mean, this was a game where

461
00:26:37,760 --> 00:26:40,679
Speaker 1: typically you would have to go someplace like a theater

462
00:26:40,840 --> 00:26:43,159
Speaker 1: or a bar or something in order to play it.

463
00:26:43,359 --> 00:26:45,359
Speaker 1: Eventually you would be able to go to arcades and

464
00:26:45,400 --> 00:26:49,120
Speaker 1: play it, and this would really see a tight relationship

465
00:26:49,400 --> 00:26:53,920
Speaker 1: formed between the arcade and home markets. Console companies began

466
00:26:53,960 --> 00:26:57,520
Speaker 1: to see the value in licensing popular arcade titles for

467
00:26:57,640 --> 00:27:02,520
Speaker 1: home markets, and arcade developers saw the added value of

468
00:27:02,560 --> 00:27:06,960
Speaker 1: bringing in revenue by licensing their intellectual property to the

469
00:27:07,040 --> 00:27:11,120
Speaker 1: video game companies. So it became kind of a symbiotic relationship.

470
00:27:12,040 --> 00:27:20,840
Speaker 1: At first, it's some foreshadowing. So starting around at sales

471
00:27:20,880 --> 00:27:24,040
Speaker 1: start to pick up and the folks at Warner Communications,

472
00:27:24,640 --> 00:27:28,960
Speaker 1: remember Warner had purchased Atari in nineteen seventy six. They

473
00:27:28,960 --> 00:27:33,120
Speaker 1: were encouraged by this, and it also meant that there

474
00:27:33,200 --> 00:27:36,719
Speaker 1: was still life in the at Remember, the plan was

475
00:27:36,760 --> 00:27:39,320
Speaker 1: to phase it out in nineteen eighty and to have

476
00:27:39,560 --> 00:27:42,919
Speaker 1: a new kind of hardware come on the scene. But

477
00:27:43,440 --> 00:27:45,880
Speaker 1: now they were seeing more and more sales, which meant

478
00:27:45,920 --> 00:27:48,840
Speaker 1: the company decided to push back plans to introduce new,

479
00:27:48,920 --> 00:27:52,200
Speaker 1: more powerful consoles. Why would you spend cash to produce

480
00:27:52,280 --> 00:27:54,880
Speaker 1: something new if you can still move units of something

481
00:27:54,920 --> 00:27:58,600
Speaker 1: that you're already making, alright, But something else that was

482
00:27:58,640 --> 00:28:02,400
Speaker 1: going on around this same time, and it's a big

483
00:28:02,440 --> 00:28:06,080
Speaker 1: part of it. This was the birth of the independent developer. Now.

484
00:28:06,119 --> 00:28:09,960
Speaker 1: I mentioned earlier that at first, each console company was

485
00:28:10,119 --> 00:28:14,159
Speaker 1: responsible for putting out games on its system, So the

486
00:28:14,160 --> 00:28:18,320
Speaker 1: Atari cartridges came from Atari. Atari was the company that

487
00:28:18,400 --> 00:28:22,080
Speaker 1: both made the console and made the games. But then

488
00:28:22,160 --> 00:28:25,360
Speaker 1: things changed, and they changed largely because of how Atari

489
00:28:25,560 --> 00:28:30,560
Speaker 1: was conducting business under Warner Communications. For one thing, Atari

490
00:28:30,680 --> 00:28:34,800
Speaker 1: wasn't paying out bonuses or royalties. You were paid a

491
00:28:34,840 --> 00:28:37,639
Speaker 1: salary and it didn't matter if the game you made

492
00:28:37,680 --> 00:28:40,080
Speaker 1: flopped or if it was a huge hit. You made

493
00:28:40,120 --> 00:28:43,200
Speaker 1: the same amount. So you could make a game that

494
00:28:43,240 --> 00:28:46,560
Speaker 1: would make the company millions of dollars, but you wouldn't

495
00:28:46,560 --> 00:28:49,760
Speaker 1: see any of that cash. Also, if you worked for Atari,

496
00:28:49,880 --> 00:28:53,080
Speaker 1: the only name that was associated with any game they'll

497
00:28:53,160 --> 00:28:56,320
Speaker 1: name that was on the cartridge would be the company

498
00:28:56,360 --> 00:28:59,120
Speaker 1: Atari's name. It didn't matter if you came up with

499
00:28:59,160 --> 00:29:01,400
Speaker 1: the game idea. It didn't even matter if you coded

500
00:29:01,440 --> 00:29:04,320
Speaker 1: the whole darned thing yourself. The name of the cartridge

501
00:29:04,360 --> 00:29:07,000
Speaker 1: was just Atari. There was no credit to you. You

502
00:29:07,040 --> 00:29:10,880
Speaker 1: weren't acknowledged at all, partly because at least the belief

503
00:29:10,960 --> 00:29:13,560
Speaker 1: was that Atari didn't want to run the risk of

504
00:29:14,120 --> 00:29:17,400
Speaker 1: losing talent to some other company. Like if they said, oh,

505
00:29:17,480 --> 00:29:19,480
Speaker 1: this game was created by so and so, then some

506
00:29:19,520 --> 00:29:22,960
Speaker 1: other company might approach so and so and say, hey,

507
00:29:23,000 --> 00:29:24,560
Speaker 1: I see you like to make games. How would you

508
00:29:24,560 --> 00:29:28,160
Speaker 1: like to make way more money doing it? Well, game

509
00:29:28,200 --> 00:29:30,640
Speaker 1: creators weren't totally cool with this. Allot of them wanted

510
00:29:30,680 --> 00:29:33,400
Speaker 1: to have more credit, or at least any credit, and

511
00:29:33,440 --> 00:29:36,160
Speaker 1: Atari just wasn't keen on doing that. Plus, the folks

512
00:29:36,160 --> 00:29:39,520
Speaker 1: at war Our Communications were really cost focused, and they

513
00:29:39,520 --> 00:29:42,640
Speaker 1: didn't trust video game developers. They didn't think of them

514
00:29:42,640 --> 00:29:45,560
Speaker 1: as creatives. So in nineteen seventy nine, a group of

515
00:29:45,560 --> 00:29:49,080
Speaker 1: Atari game developers, four of them left the company to

516
00:29:49,160 --> 00:29:54,360
Speaker 1: found a new one called Activision. Yeah, Activision, as in

517
00:29:54,400 --> 00:29:57,200
Speaker 1: the company that's now known as part of Activision Blizzard.

518
00:29:57,680 --> 00:30:00,160
Speaker 1: It all started off because a bunch of Atari game

519
00:30:00,200 --> 00:30:02,960
Speaker 1: developers were fed up with how Atari was running things.

520
00:30:03,440 --> 00:30:05,880
Speaker 1: They originally planned to create a company that would develop

521
00:30:06,000 --> 00:30:09,320
Speaker 1: its own console, but ultimately they would develop games that

522
00:30:09,320 --> 00:30:12,400
Speaker 1: would run on the Atari twenty hundred, but they would

523
00:30:12,440 --> 00:30:16,000
Speaker 1: not be made by Atari. This would eventually spawn a

524
00:30:16,080 --> 00:30:18,959
Speaker 1: lawsuit in which Attari tried to make Activision stop. They

525
00:30:18,960 --> 00:30:26,360
Speaker 1: were claiming the Activision was infringing upon proprietary intellectual property,

526
00:30:26,680 --> 00:30:30,320
Speaker 1: but eventually the two companies reached a settlement and Activision

527
00:30:30,360 --> 00:30:34,000
Speaker 1: would pay a licensing fee to Atari, but otherwise would

528
00:30:34,000 --> 00:30:36,680
Speaker 1: be able to continue developing games for the Atari twenty

529
00:30:36,720 --> 00:30:40,240
Speaker 1: six hundred. The talent that moved from Attari to Activision

530
00:30:40,320 --> 00:30:44,160
Speaker 1: represented some of the strongest developers who had been at Atari,

531
00:30:44,320 --> 00:30:46,880
Speaker 1: so now Atari was forced back a step when it

532
00:30:46,920 --> 00:30:51,480
Speaker 1: came to developing games. Plus, Atari's games would compete against

533
00:30:51,600 --> 00:30:55,720
Speaker 1: Activision's games, and Activision would be just the first third

534
00:30:55,720 --> 00:31:00,960
Speaker 1: party game developer to create a hundred cartridges. Others would follow.

535
00:31:01,040 --> 00:31:03,840
Speaker 1: One of those would be a Magic, another company that

536
00:31:04,200 --> 00:31:08,400
Speaker 1: had some x Atari talent, create their own developer company,

537
00:31:08,440 --> 00:31:13,680
Speaker 1: and the Magic would launch in one So now Atari

538
00:31:13,840 --> 00:31:15,960
Speaker 1: was going to have to compete with other companies that

539
00:31:16,000 --> 00:31:19,840
Speaker 1: were making Atari games, when before Atari was the one

540
00:31:19,880 --> 00:31:23,239
Speaker 1: and only source of Atari games. This will be an

541
00:31:23,280 --> 00:31:27,080
Speaker 1: important component as we move forward. Now we need to

542
00:31:27,080 --> 00:31:31,080
Speaker 1: talk a bit about distribution and retail because this would

543
00:31:31,120 --> 00:31:33,720
Speaker 1: also play an enormous part in the collapse of the

544
00:31:33,760 --> 00:31:40,560
Speaker 1: market in So let's talk about how retail typically works. Okay,

545
00:31:40,640 --> 00:31:45,960
Speaker 1: So a retail outlet deals with either wholesalers or distributors,

546
00:31:46,680 --> 00:31:49,840
Speaker 1: buying either from a wholesaler or directly from a distributor,

547
00:31:49,880 --> 00:31:54,120
Speaker 1: or maybe directly from a source itself. But the point is,

548
00:31:54,160 --> 00:31:58,160
Speaker 1: the real retail organization orders a certain number of units

549
00:31:58,200 --> 00:32:01,080
Speaker 1: of whatever it is we're dealing with, in this case,

550
00:32:01,200 --> 00:32:05,400
Speaker 1: video games, and that then becomes the stock that the

551
00:32:05,440 --> 00:32:09,800
Speaker 1: retail establishment has to sell. Then the retail company marks

552
00:32:09,880 --> 00:32:13,280
Speaker 1: up the price of this stuff and sells it on

553
00:32:13,400 --> 00:32:16,920
Speaker 1: to the consumer. The retail store is the point of

554
00:32:17,000 --> 00:32:20,720
Speaker 1: sale for the customer, right And of course the retail

555
00:32:20,760 --> 00:32:22,880
Speaker 1: store has to mark up the price or else it

556
00:32:22,880 --> 00:32:25,560
Speaker 1: would make no money. So it has to sell the

557
00:32:25,640 --> 00:32:27,840
Speaker 1: thing for more money than it costs for it to

558
00:32:28,040 --> 00:32:31,080
Speaker 1: purchase it to put it into its stock. That all

559
00:32:31,120 --> 00:32:34,800
Speaker 1: makes sense now, Typically a retailer is on the hook

560
00:32:35,200 --> 00:32:38,720
Speaker 1: for the units that they order. So if a consumer,

561
00:32:39,200 --> 00:32:41,479
Speaker 1: you know, if the consumers don't buy enough of whatever

562
00:32:41,520 --> 00:32:45,480
Speaker 1: it is we're talking about, then typically the retailer has

563
00:32:45,520 --> 00:32:49,760
Speaker 1: to eat that cost. So if video games had worked

564
00:32:49,800 --> 00:32:52,840
Speaker 1: this way in the nineteen eighties, it would have been

565
00:32:52,880 --> 00:32:54,920
Speaker 1: a very different story. It would have looked something like this.

566
00:32:55,040 --> 00:33:00,400
Speaker 1: Let's say, um, Jimmy Bob's video game emporium purchases twenty

567
00:33:00,440 --> 00:33:04,640
Speaker 1: copies of Activision's River Rate, and let's just say, for

568
00:33:04,680 --> 00:33:08,120
Speaker 1: the sake of this this example, that that costs ten

569
00:33:08,160 --> 00:33:12,000
Speaker 1: dollars a pop. So each copy is ten dollars for

570
00:33:12,080 --> 00:33:16,040
Speaker 1: Jimmy Bob to purchase at this this arrangement. But then

571
00:33:16,120 --> 00:33:19,680
Speaker 1: Jimmy Bob marks up those copies to thirty dollars each,

572
00:33:20,280 --> 00:33:23,280
Speaker 1: So Jimmy Bob spent a total of two hundred dollars

573
00:33:23,280 --> 00:33:26,080
Speaker 1: buying these twenty copies of River Raiate to have in stock.

574
00:33:26,880 --> 00:33:28,840
Speaker 1: That means that Jimmy Bob needs to sell at least

575
00:33:28,920 --> 00:33:35,240
Speaker 1: seven copies to start making money in this drastically oversimplified example.

576
00:33:35,520 --> 00:33:38,280
Speaker 1: So seven copies at thirty bucks a pop, that means

577
00:33:38,320 --> 00:33:42,960
Speaker 1: he would net two. But for some reason, this here town,

578
00:33:43,120 --> 00:33:46,160
Speaker 1: the Jimmy Bob's in it don't have video games with

579
00:33:46,280 --> 00:33:50,240
Speaker 1: sophisticated tastes and they don't appreciate the hard work the

580
00:33:50,280 --> 00:33:53,440
Speaker 1: Activision put in for River Raid. So Jimmy Bob only

581
00:33:53,480 --> 00:33:57,040
Speaker 1: sells three copies, that means he brings in ninety dollars,

582
00:33:57,040 --> 00:33:59,520
Speaker 1: but he spent two hundred on the games he bought

583
00:33:59,560 --> 00:34:03,560
Speaker 1: straight for Activision. That means Jimmy Bob has going to

584
00:34:03,640 --> 00:34:06,840
Speaker 1: bed poorer but wiser. At least you would if that's

585
00:34:06,840 --> 00:34:09,399
Speaker 1: how video game distribution actually worked in the old days.

586
00:34:09,920 --> 00:34:13,319
Speaker 1: It didn't. See in that case, the retailer would have

587
00:34:13,360 --> 00:34:16,680
Speaker 1: to come up with other strategies, maybe trying to position

588
00:34:16,760 --> 00:34:20,120
Speaker 1: games in a more inviting spot to get more people

589
00:34:20,160 --> 00:34:23,200
Speaker 1: to buy them, maybe marking down the price a little

590
00:34:23,200 --> 00:34:25,600
Speaker 1: bit so that they can at least break even, if

591
00:34:25,640 --> 00:34:28,319
Speaker 1: not make a little bit of profit. But that's not

592
00:34:28,400 --> 00:34:31,120
Speaker 1: how video game distribution worked in the early eighties. See,

593
00:34:31,120 --> 00:34:34,759
Speaker 1: retailers were not super keen to carry video games that much,

594
00:34:35,400 --> 00:34:39,360
Speaker 1: so companies had to make deals with these retailers in

595
00:34:39,480 --> 00:34:43,920
Speaker 1: order to get their products onto store shelves, and it

596
00:34:44,000 --> 00:34:46,320
Speaker 1: put a lot more of the risk on the game

597
00:34:46,360 --> 00:34:49,799
Speaker 1: developers instead of the retailers. It was the cost of

598
00:34:49,840 --> 00:34:53,120
Speaker 1: doing business. This was the way to convince retailers, hey,

599
00:34:53,440 --> 00:34:56,640
Speaker 1: give our game systems and our cartridges shelf space in

600
00:34:56,719 --> 00:34:59,520
Speaker 1: your store. Shelf space that could go to something else

601
00:34:59,560 --> 00:35:03,400
Speaker 1: that you know, has a proven track record. So the

602
00:35:03,400 --> 00:35:07,319
Speaker 1: deal that a lot of companies agreed to was that

603
00:35:07,480 --> 00:35:11,920
Speaker 1: the video game developer would provide copies to retailers. Retailers

604
00:35:11,960 --> 00:35:14,160
Speaker 1: would say, here's how many copies I think I need.

605
00:35:14,800 --> 00:35:17,840
Speaker 1: The video game developer would send those copies to the retailer.

606
00:35:18,640 --> 00:35:21,600
Speaker 1: The video game developer would be financially on the hook.

607
00:35:22,080 --> 00:35:24,680
Speaker 1: If the retailer found it impossible to move the games,

608
00:35:24,719 --> 00:35:29,400
Speaker 1: they would have to take all unsold inventory back. So

609
00:35:29,440 --> 00:35:32,120
Speaker 1: now the retailers didn't carry a risk, right they would

610
00:35:32,200 --> 00:35:35,600
Speaker 1: make money if they the games sold, but they would

611
00:35:35,640 --> 00:35:38,759
Speaker 1: essentially get their money back if they didn't sell all

612
00:35:38,760 --> 00:35:41,239
Speaker 1: the titles, because they would return the titles to the

613
00:35:41,360 --> 00:35:47,000
Speaker 1: video game developer and recapture costs, and so the developer

614
00:35:47,000 --> 00:35:51,759
Speaker 1: would take on the burden of games unsold. So yeah,

615
00:35:51,800 --> 00:35:54,360
Speaker 1: the retailers weren't on the hook for those unsold games.

616
00:35:54,400 --> 00:35:58,320
Speaker 1: This would be a key component for why the market

617
00:35:58,320 --> 00:36:01,520
Speaker 1: would crash, and it put a ton of power in

618
00:36:01,600 --> 00:36:05,120
Speaker 1: the hands of the retailers. And because of that, and

619
00:36:05,160 --> 00:36:07,640
Speaker 1: because there was this perception that video games were the

620
00:36:07,719 --> 00:36:11,560
Speaker 1: license to print money, some retailers went a bit hog wild.

621
00:36:11,560 --> 00:36:15,760
Speaker 1: They drastically overestimated how many copies they would need for

622
00:36:16,120 --> 00:36:19,239
Speaker 1: their titles, thinking like, everyone wants video games, so we're

623
00:36:19,239 --> 00:36:23,080
Speaker 1: gonna order, you know, one copies of this thing. But

624
00:36:23,200 --> 00:36:25,600
Speaker 1: then you can understand why retailers would do this too,

625
00:36:25,600 --> 00:36:29,399
Speaker 1: because there was no risk, right. I mean, retailer could

626
00:36:29,520 --> 00:36:32,520
Speaker 1: order a hundred copies of a game and if they

627
00:36:32,520 --> 00:36:35,160
Speaker 1: only sold ten of them, well, they could still return

628
00:36:35,200 --> 00:36:38,400
Speaker 1: the other ninety to the video game company and recapture

629
00:36:38,440 --> 00:36:42,239
Speaker 1: those costs, so they would not be in a in

630
00:36:42,280 --> 00:36:46,080
Speaker 1: a really bad position as long as everything held steady.

631
00:36:46,440 --> 00:36:49,440
Speaker 1: So even really good popular games were a bit of

632
00:36:49,440 --> 00:36:52,759
Speaker 1: a risk for game developers, Like if a retailer like

633
00:36:52,880 --> 00:36:56,360
Speaker 1: Sears put in a really large order, you'd have to

634
00:36:56,440 --> 00:37:00,799
Speaker 1: pay to manufacture that many units of car artridges and

635
00:37:00,840 --> 00:37:03,560
Speaker 1: then ship them to the retailer. And then if it

636
00:37:03,600 --> 00:37:06,800
Speaker 1: turned out that Sears had drastically overestimated how many units

637
00:37:06,840 --> 00:37:09,439
Speaker 1: they would actually sell, you would have to take all

638
00:37:09,440 --> 00:37:11,680
Speaker 1: the excess back and figure out what to do with it.

639
00:37:12,000 --> 00:37:16,040
Speaker 1: So for bigger companies like Atari and to a lesser extent, Activision,

640
00:37:16,440 --> 00:37:19,319
Speaker 1: this was something that they could potentially weather on a

641
00:37:19,360 --> 00:37:22,319
Speaker 1: case by case basis. But for other companies it would

642
00:37:22,320 --> 00:37:25,080
Speaker 1: be a different story. While we saw a ton of

643
00:37:25,120 --> 00:37:28,640
Speaker 1: third party developers pop up in the Atari era, most

644
00:37:28,680 --> 00:37:31,360
Speaker 1: of them wouldn't stick around for very long. The agreements

645
00:37:31,360 --> 00:37:34,239
Speaker 1: with retailers would prove to be too expensive for many

646
00:37:34,280 --> 00:37:37,520
Speaker 1: of those companies to navigate, and they would go bankrupt

647
00:37:37,680 --> 00:37:40,600
Speaker 1: as a result. In fact, sometimes they would go bankrupt

648
00:37:40,760 --> 00:37:43,680
Speaker 1: before they could take back any copies of games. We'll

649
00:37:43,719 --> 00:37:47,080
Speaker 1: get to that too. But the really, really big thing

650
00:37:47,360 --> 00:37:50,080
Speaker 1: that would cause the dominoes to fall happen in the

651
00:37:50,080 --> 00:37:54,239
Speaker 1: winter of two. I'll explain more after we come back

652
00:37:54,280 --> 00:38:04,799
Speaker 1: from this break. So in December nineteen eighty two, one

653
00:38:04,880 --> 00:38:08,600
Speaker 1: or Communications holds a stockholder call. So this is when

654
00:38:08,640 --> 00:38:12,640
Speaker 1: companies have to report on performance to their shareholders in

655
00:38:12,760 --> 00:38:14,480
Speaker 1: order to keep them up to pace with what's going

656
00:38:14,520 --> 00:38:18,200
Speaker 1: on and also to lay out projections for the following year. Well,

657
00:38:18,239 --> 00:38:21,680
Speaker 1: in nineteen eighty two, video games were a huge business.

658
00:38:21,960 --> 00:38:26,960
Speaker 1: We're talking a multibillion dollar industry that was dominated by Atari.

659
00:38:27,360 --> 00:38:30,759
Speaker 1: And yeah, video games are a multibillion dollar industry today,

660
00:38:30,840 --> 00:38:33,960
Speaker 1: but you got to remember they were very young in

661
00:38:34,000 --> 00:38:38,560
Speaker 1: the nineteen eighties, right. Plus when you just for inflation,

662
00:38:38,600 --> 00:38:40,920
Speaker 1: when you talk about just a few billion dollars in

663
00:38:40,960 --> 00:38:45,040
Speaker 1: the early nineteen eighties, that's many, many billions of dollars today.

664
00:38:45,080 --> 00:38:48,239
Speaker 1: So Atari had been pretty darn busy. In nineteen eighty two,

665
00:38:48,280 --> 00:38:50,920
Speaker 1: it released the Atari fifty two hundred, which was an

666
00:38:51,000 --> 00:38:55,479
Speaker 1: upgrade from the VCS Slash D so it boasted better

667
00:38:55,480 --> 00:38:58,719
Speaker 1: graphics than the twenty s hundred. However, it also wasn't

668
00:38:58,760 --> 00:39:02,920
Speaker 1: compatible with the games Ford, at least not initially, and

669
00:39:02,920 --> 00:39:05,520
Speaker 1: it also didn't have very many games of its own

670
00:39:05,640 --> 00:39:08,319
Speaker 1: to speak of, because Atari had actually directed most of

671
00:39:08,320 --> 00:39:12,560
Speaker 1: its game development towards the DRED because that installed base

672
00:39:12,640 --> 00:39:15,520
Speaker 1: for the console was still so large, but it meant

673
00:39:15,560 --> 00:39:18,719
Speaker 1: that they didn't really have games to help sell the

674
00:39:19,440 --> 00:39:23,600
Speaker 1: unred to the public. Meanwhile, Calliko had launched the Callico Vision,

675
00:39:23,680 --> 00:39:27,719
Speaker 1: which ironically could pay play at twenty games on it,

676
00:39:28,239 --> 00:39:30,279
Speaker 1: so if you bought a Callico Vision you could play

677
00:39:30,320 --> 00:39:32,239
Speaker 1: old Atari twenty six hundred titles on it, like if

678
00:39:32,239 --> 00:39:36,120
Speaker 1: you bought you couldn't. And then in Television launched the

679
00:39:36,160 --> 00:39:40,040
Speaker 1: in Television two, which was pretty much just in Television

680
00:39:40,040 --> 00:39:45,000
Speaker 1: one with a new case and just didn't sell anywhere

681
00:39:45,080 --> 00:39:47,799
Speaker 1: close to as many units as the twenty hundred had

682
00:39:48,320 --> 00:39:50,080
Speaker 1: And here's where we get to some of the big

683
00:39:50,120 --> 00:39:52,920
Speaker 1: issues that Warner Communications was going to have to address.

684
00:39:53,480 --> 00:39:57,640
Speaker 1: One is that by two the Atari undred was really

685
00:39:57,719 --> 00:40:02,319
Speaker 1: showing its age. The Colliko vision was more technically advanced.

686
00:40:02,600 --> 00:40:05,320
Speaker 1: And of course, Attari itself had initially planned to phase

687
00:40:05,360 --> 00:40:08,359
Speaker 1: out the twenty six hundred in nineteen eighty, but then

688
00:40:08,440 --> 00:40:11,359
Speaker 1: changed course once the console sales started to pick up,

689
00:40:12,080 --> 00:40:15,480
Speaker 1: but the market was pretty well saturated. Most of the

690
00:40:15,480 --> 00:40:20,719
Speaker 1: folks who wanted an atarid already owned one, didn't grab

691
00:40:20,800 --> 00:40:23,560
Speaker 1: hold in the market the same way, and so that

692
00:40:23,640 --> 00:40:27,480
Speaker 1: was a disappointment to Atari. Meanwhile, Atari was also seeing

693
00:40:27,719 --> 00:40:30,760
Speaker 1: these other developers out there, these third party developers putting

694
00:40:30,760 --> 00:40:35,279
Speaker 1: out games that were competing with Atari's own titles. So

695
00:40:35,440 --> 00:40:39,399
Speaker 1: while Atari would make licensing fees from these other third

696
00:40:39,400 --> 00:40:43,799
Speaker 1: party developers, it wasn't profiting off of big sales. So

697
00:40:44,640 --> 00:40:47,000
Speaker 1: if Act Division were to put out a real banger,

698
00:40:47,480 --> 00:40:50,760
Speaker 1: and they put out a lot of bangers, ATRII wouldn't

699
00:40:50,800 --> 00:40:53,560
Speaker 1: see any of those profits. It would get the licensing fee,

700
00:40:53,600 --> 00:40:57,560
Speaker 1: but you know, if River Raids sold millions of copies,

701
00:40:57,719 --> 00:41:00,319
Speaker 1: none of that money was really going to Atari. So

702
00:41:00,400 --> 00:41:03,360
Speaker 1: while video games in general were doing well. Atari, the

703
00:41:03,360 --> 00:41:07,719
Speaker 1: company wasn't performing quite where it wanted to be, and

704
00:41:07,800 --> 00:41:12,320
Speaker 1: because Atari dominated the market, this meant that the industry

705
00:41:12,320 --> 00:41:14,960
Speaker 1: as a whole was on shaky ground, like it was

706
00:41:15,000 --> 00:41:18,440
Speaker 1: all kind of dependent upon Attari to some extent, like

707
00:41:19,040 --> 00:41:21,600
Speaker 1: Activision as a company could be doing great, but if

708
00:41:21,600 --> 00:41:25,440
Speaker 1: Atari were to suffer, while Activision would as well, because

709
00:41:25,680 --> 00:41:27,960
Speaker 1: you've got to be able to play the games on something, right.

710
00:41:28,560 --> 00:41:32,560
Speaker 1: So in this shareholder meeting, one or Communications reps revealed

711
00:41:32,600 --> 00:41:35,839
Speaker 1: that they had determined the profit increase for Atari would

712
00:41:35,880 --> 00:41:41,440
Speaker 1: be around ten to fift percent. That's great, right, You're

713
00:41:41,480 --> 00:41:46,239
Speaker 1: seeing a profit increase. Well, the problem was that Wall

714
00:41:46,280 --> 00:41:50,000
Speaker 1: Street analysts had predicted that this would be closer to

715
00:41:50,120 --> 00:41:55,319
Speaker 1: a fifty percent increase in profits, So being adjusted down

716
00:41:55,360 --> 00:41:58,560
Speaker 1: to ten to fifteen percent was a big drop. The

717
00:41:58,640 --> 00:42:01,160
Speaker 1: video game market seemed like it was a gold mine.

718
00:42:01,360 --> 00:42:05,320
Speaker 1: But you know too, investors, this seemed like it was

719
00:42:05,360 --> 00:42:08,400
Speaker 1: an indication that the industry had already peaked and was

720
00:42:08,440 --> 00:42:12,320
Speaker 1: now petering out. Like they were seeing this as a warning.

721
00:42:13,280 --> 00:42:16,320
Speaker 1: So a lot of people, discouraged by this news decided

722
00:42:16,360 --> 00:42:21,160
Speaker 1: to dump their stock in Warner Communications. That depreciated the

723
00:42:21,280 --> 00:42:26,240
Speaker 1: value of Warner's stock, and Warner's Communications saw its stock

724
00:42:26,400 --> 00:42:29,760
Speaker 1: dropped from fifty one dollar a share to thirty five

725
00:42:29,840 --> 00:42:34,080
Speaker 1: dollars a share. The company lost hundreds of millions of

726
00:42:34,080 --> 00:42:38,719
Speaker 1: dollars in value overnight. Now, at this point, Atari contributed

727
00:42:38,760 --> 00:42:43,439
Speaker 1: more to Warner Communications revenue than the film division did.

728
00:42:43,640 --> 00:42:48,400
Speaker 1: In fact, according to some sources, Atari was generating five

729
00:42:48,600 --> 00:42:52,120
Speaker 1: times the amount of revenue then Warner Brothers movies were

730
00:42:52,160 --> 00:42:56,480
Speaker 1: at that point. Now, obviously this had a huge impact

731
00:42:56,480 --> 00:42:59,759
Speaker 1: on Atari, and because Atari was almost synonymous with the

732
00:42:59,800 --> 00:43:02,680
Speaker 1: home video game market, it also had a huge impact

733
00:43:03,200 --> 00:43:06,439
Speaker 1: everywhere else as well. But this was still just one

734
00:43:06,520 --> 00:43:10,680
Speaker 1: really big factor in the crash. Now, I should add

735
00:43:10,719 --> 00:43:13,719
Speaker 1: there were other ones that also played a part, and

736
00:43:13,800 --> 00:43:16,000
Speaker 1: one was that Atari was spending a lot of money

737
00:43:16,000 --> 00:43:20,040
Speaker 1: getting licenses for really popular I p like pac Man,

738
00:43:20,560 --> 00:43:24,680
Speaker 1: and Atari made a pretty mediocre home version of pac Man.

739
00:43:25,000 --> 00:43:29,560
Speaker 1: It was in some ways technically impressive because Atari was

740
00:43:29,560 --> 00:43:32,560
Speaker 1: only powerful enough to show two sprites at a time. Well,

741
00:43:32,600 --> 00:43:36,320
Speaker 1: pac Man is your character of pac Man plus four ghosts,

742
00:43:36,560 --> 00:43:38,480
Speaker 1: So how do you make sure that you can show

743
00:43:39,840 --> 00:43:42,480
Speaker 1: you know, five sprites at one time. The solution was

744
00:43:42,520 --> 00:43:45,160
Speaker 1: to make the ghosts flash. They were doing so at

745
00:43:45,200 --> 00:43:49,160
Speaker 1: a very very fast rate, so they looked kind of

746
00:43:49,160 --> 00:43:53,040
Speaker 1: of spectral, but they were flashing so that technically each

747
00:43:53,080 --> 00:43:55,320
Speaker 1: of the four ghosts was only appearing for like a

748
00:43:55,400 --> 00:43:59,319
Speaker 1: quarter of a second, and then collectively, you you know,

749
00:43:59,360 --> 00:44:01,160
Speaker 1: through the persist and sub vision, it looked like they

750
00:44:01,160 --> 00:44:04,640
Speaker 1: were just there. Emulators make this problem way worse. So

751
00:44:04,680 --> 00:44:07,680
Speaker 1: if you ever see an emulator version of the pac

752
00:44:07,719 --> 00:44:10,640
Speaker 1: Man game, the ghosts are flashing on and off in

753
00:44:10,680 --> 00:44:13,799
Speaker 1: a very dramatic way. That wasn't the case with the

754
00:44:13,840 --> 00:44:18,880
Speaker 1: actual game when it first came out. Still it's not great. However,

755
00:44:19,640 --> 00:44:22,200
Speaker 1: it sold really well. You remember when I said Space

756
00:44:22,239 --> 00:44:26,160
Speaker 1: Invaders was Atari's second most popular cartridge. Guess what number

757
00:44:26,160 --> 00:44:29,960
Speaker 1: one was. Yep, it was pac Man. The game was

758
00:44:30,040 --> 00:44:34,280
Speaker 1: not a flop, it was a success. No other Atari

759
00:44:34,400 --> 00:44:39,560
Speaker 1: cartridge for the Atari sold more copies than pac Man. However,

760
00:44:40,520 --> 00:44:46,400
Speaker 1: retailers ordered more copies than they sold. So retailers ordered

761
00:44:46,960 --> 00:44:49,600
Speaker 1: way more copies of pac Man because it was such

762
00:44:49,640 --> 00:44:52,319
Speaker 1: a huge hit of the arcade. You know, Pacman was

763
00:44:53,120 --> 00:44:58,040
Speaker 1: the arcade game of the early nine It spawned a

764
00:44:58,160 --> 00:45:02,480
Speaker 1: crazy amount of merchandise. There was a cartoon series like

765
00:45:03,040 --> 00:45:06,640
Speaker 1: it was in popular culture. It was beyond just an

766
00:45:06,719 --> 00:45:09,360
Speaker 1: arcade game. This was something that was seen as like

767
00:45:09,400 --> 00:45:13,840
Speaker 1: a lifestyle thing. So retailers were sure that the copies

768
00:45:13,840 --> 00:45:16,000
Speaker 1: were just gonna sell out all over the place. They

769
00:45:16,080 --> 00:45:20,319
Speaker 1: ended up ordering way more than they needed. This meant

770
00:45:20,320 --> 00:45:24,279
Speaker 1: that Attori had to take back the unsold stock. And

771
00:45:24,320 --> 00:45:26,880
Speaker 1: the same is true for another title that is frequently

772
00:45:27,120 --> 00:45:30,920
Speaker 1: mentioned whenever you talk about the video game crash, the

773
00:45:31,000 --> 00:45:36,279
Speaker 1: infamous E T. The Extraterrestrial. It's frequently mentioned in conversations

774
00:45:36,320 --> 00:45:38,959
Speaker 1: about the as you know, the worst game of all time.

775
00:45:39,000 --> 00:45:42,040
Speaker 1: It's it's often in that mix. In fact, Tex Stuff

776
00:45:42,040 --> 00:45:48,000
Speaker 1: famously once called it that too, largely because of public perception. Um,

777
00:45:48,160 --> 00:45:50,960
Speaker 1: here's the thing. It's not a very good game, but

778
00:45:51,120 --> 00:45:54,920
Speaker 1: it's definitely not the worst game of all time. I mean,

779
00:45:54,960 --> 00:45:58,719
Speaker 1: for one thing, there are games that have shopped that

780
00:45:59,200 --> 00:46:03,879
Speaker 1: people bought that are literally unplayable, that they are so

781
00:46:04,000 --> 00:46:07,120
Speaker 1: broken you cannot play them. E T. Was not that

782
00:46:07,280 --> 00:46:11,160
Speaker 1: ET was playable, It's just it was also a little confusing,

783
00:46:11,680 --> 00:46:14,520
Speaker 1: so it was kind of hard to figure out what

784
00:46:14,600 --> 00:46:16,719
Speaker 1: you were supposed to do. It also wasn't very much

785
00:46:16,760 --> 00:46:19,080
Speaker 1: fun even when you knew what you were supposed to do.

786
00:46:19,440 --> 00:46:22,000
Speaker 1: But it did work now I owned a copy of it.

787
00:46:22,040 --> 00:46:26,600
Speaker 1: In fact, well, ET also didn't sell as many units

788
00:46:26,640 --> 00:46:28,800
Speaker 1: as Atari produced. It sold like a million and a

789
00:46:28,840 --> 00:46:33,440
Speaker 1: half units, but Atari made more than that. And also

790
00:46:33,520 --> 00:46:36,200
Speaker 1: the licensing fee the Atari paid in order to be

791
00:46:36,239 --> 00:46:38,680
Speaker 1: able to make ET in the first place was pretty

792
00:46:38,760 --> 00:46:42,600
Speaker 1: darn steep, so that was a big expense. So Atari

793
00:46:42,680 --> 00:46:44,440
Speaker 1: spent a lot of money making E t and then

794
00:46:44,440 --> 00:46:48,600
Speaker 1: had to spend more money to take back unsold stock.

795
00:46:48,760 --> 00:46:53,400
Speaker 1: And famously Atari would toss thousands of cartridges into a landfill,

796
00:46:53,719 --> 00:46:56,920
Speaker 1: which would become the subject of a documentary film many

797
00:46:57,080 --> 00:47:03,000
Speaker 1: decades later. So Pacman and ET cost Atari money. Definitely,

798
00:47:03,200 --> 00:47:06,400
Speaker 1: they really they took you know, you took a hit

799
00:47:06,440 --> 00:47:10,279
Speaker 1: on both of those. However, ET and Pacman did not

800
00:47:10,400 --> 00:47:15,000
Speaker 1: spontaneously cause the entire video game industry to crumble. There

801
00:47:15,080 --> 00:47:17,120
Speaker 1: was no shortage of lousy games out there for the

802
00:47:17,120 --> 00:47:20,320
Speaker 1: A and I'm sure that was part of the reason

803
00:47:20,360 --> 00:47:23,480
Speaker 1: that folks weren't eager to buy more consoles. But that's

804
00:47:23,560 --> 00:47:26,120
Speaker 1: just one piece of the puzzle as well. I have

805
00:47:26,200 --> 00:47:28,399
Speaker 1: a little bit more I want to say about this,

806
00:47:28,760 --> 00:47:39,960
Speaker 1: but before I get to that, let's take one last break. Okay,

807
00:47:40,000 --> 00:47:42,960
Speaker 1: so we've established that pac Man and et. While certainly

808
00:47:43,520 --> 00:47:47,799
Speaker 1: you know, a black mark on Atari's reputation and a

809
00:47:47,920 --> 00:47:51,120
Speaker 1: hit to their revenue, we're not responsible for the entire

810
00:47:51,560 --> 00:47:56,319
Speaker 1: industry crashing in. On a similar note, we can also

811
00:47:56,400 --> 00:48:00,480
Speaker 1: mention home computers. People frequently cite home computers as being

812
00:48:00,480 --> 00:48:04,319
Speaker 1: the reason why video game consoles died. That is being

813
00:48:04,480 --> 00:48:07,240
Speaker 1: a little too simplistic as well. The home PC market

814
00:48:07,400 --> 00:48:11,120
Speaker 1: had started in the late nineteen seventies. Like the Apple,

815
00:48:11,280 --> 00:48:13,840
Speaker 1: the original Apple computer was really just for hobbyists. The

816
00:48:13,880 --> 00:48:17,640
Speaker 1: Apple two was the first one aimed at beyond just

817
00:48:17,719 --> 00:48:20,960
Speaker 1: the hobbyist market, but it was fairly modest. Early on.

818
00:48:21,360 --> 00:48:24,080
Speaker 1: Some folks point to computers as being the reason that

819
00:48:24,120 --> 00:48:28,240
Speaker 1: consoles were dying because parents were switching to computers because

820
00:48:28,239 --> 00:48:31,560
Speaker 1: the computer could do way more stuff than just play games.

821
00:48:31,600 --> 00:48:35,560
Speaker 1: They could potentially help a kid do homework and stuff,

822
00:48:36,080 --> 00:48:39,080
Speaker 1: so they were looked at as being, you know, useful

823
00:48:39,239 --> 00:48:42,759
Speaker 1: and not just a diversion. And I'm sure there's an

824
00:48:42,760 --> 00:48:46,080
Speaker 1: element of truth to that for at least some households,

825
00:48:46,120 --> 00:48:49,760
Speaker 1: But computers were typically much more expensive than home video

826
00:48:49,800 --> 00:48:53,400
Speaker 1: game consoles, and even by the mid nineteen eighties they

827
00:48:53,440 --> 00:48:57,000
Speaker 1: were still kind of a niche market, Like, yeah, you

828
00:48:57,040 --> 00:48:59,200
Speaker 1: could buy a computer instead of a home video game

829
00:48:59,239 --> 00:49:03,439
Speaker 1: console system, but you'd be spending five hundred to seven

830
00:49:03,840 --> 00:49:09,360
Speaker 1: dollars more in nineteen eighties dollars. That's a significant expense.

831
00:49:09,560 --> 00:49:14,200
Speaker 1: So I think they contributed to the problem that video

832
00:49:14,239 --> 00:49:16,840
Speaker 1: game consoles were going through, but they were not the

833
00:49:16,880 --> 00:49:21,640
Speaker 1: smoking gun. It was not that as a whole, Americans

834
00:49:21,719 --> 00:49:24,960
Speaker 1: decided that video game consoles were off and now computers

835
00:49:24,960 --> 00:49:28,800
Speaker 1: were the thing. I do think that the lousy games

836
00:49:28,840 --> 00:49:32,320
Speaker 1: had a little bit more of an impact than computer consoles.

837
00:49:32,760 --> 00:49:34,800
Speaker 1: I mean, I was a kid in the early eighties.

838
00:49:35,080 --> 00:49:37,000
Speaker 1: I asked my parents to buy a game for me,

839
00:49:37,080 --> 00:49:38,680
Speaker 1: like I said, this was what I wanted for my

840
00:49:38,760 --> 00:49:42,000
Speaker 1: birthday or for Christmas or something. And then I get

841
00:49:42,000 --> 00:49:45,400
Speaker 1: the game and it's just playing awful. Well, that's likely

842
00:49:45,480 --> 00:49:48,920
Speaker 1: to discourage my parents from buying me another game in

843
00:49:48,960 --> 00:49:51,800
Speaker 1: the future, right, Like, If I'm like, this is terrible

844
00:49:51,800 --> 00:49:53,120
Speaker 1: and I don't even want to play it and it

845
00:49:53,200 --> 00:49:56,799
Speaker 1: costs thirty bucks, probably not going to get another one

846
00:49:56,960 --> 00:50:00,319
Speaker 1: anytime soon. Now, there were some awesome games out there,

847
00:50:00,680 --> 00:50:03,239
Speaker 1: don't get me wrong, some truly amazing games. For the

848
00:50:03,239 --> 00:50:06,000
Speaker 1: Atari twenty six hundred when you take into account what

849
00:50:06,080 --> 00:50:08,479
Speaker 1: the twenty six hundred was capable of. I'm not gonna

850
00:50:08,520 --> 00:50:10,920
Speaker 1: say they would stand up toe to toe with Call

851
00:50:10,960 --> 00:50:14,040
Speaker 1: of Duty or something, but sometimes you would just end

852
00:50:14,080 --> 00:50:17,040
Speaker 1: up with rotten games because maybe you thought the name

853
00:50:17,040 --> 00:50:19,640
Speaker 1: of the game sounded cool, or the cover art on

854
00:50:19,680 --> 00:50:22,520
Speaker 1: the box was interesting. Because I remember, there was no

855
00:50:22,560 --> 00:50:26,920
Speaker 1: Worldwide Web back in those days, so you were probably

856
00:50:27,000 --> 00:50:29,440
Speaker 1: just buying something based upon how it looked in the store.

857
00:50:30,040 --> 00:50:32,759
Speaker 1: Maybe if you were living in certain markets, you might

858
00:50:32,800 --> 00:50:35,400
Speaker 1: have access to things like a trade magazine that was

859
00:50:35,440 --> 00:50:38,880
Speaker 1: covering stuff like home video games. I grew up in

860
00:50:38,960 --> 00:50:42,120
Speaker 1: rural Georgia. I was lucky to see magazines at all,

861
00:50:42,440 --> 00:50:46,200
Speaker 1: so so that was not the case for me. Anyway.

862
00:50:46,520 --> 00:50:49,560
Speaker 1: Atari went into a bit of a spiral, not just

863
00:50:49,680 --> 00:50:54,360
Speaker 1: because of the recession brought on by this uh this,

864
00:50:54,360 --> 00:50:58,520
Speaker 1: this change in investor expectations, but also due to just

865
00:50:58,640 --> 00:51:03,400
Speaker 1: mismanagement within the company itself. Atari also had a true

866
00:51:03,440 --> 00:51:06,680
Speaker 1: successor to the twenty six hundred planned This was the

867
00:51:06,800 --> 00:51:10,359
Speaker 1: seventy eight hundred. This would have been the truly more

868
00:51:10,440 --> 00:51:14,120
Speaker 1: powerful console. It technically would have been a third generation

869
00:51:14,239 --> 00:51:17,279
Speaker 1: video game console. It would have been closer to being

870
00:51:17,320 --> 00:51:20,600
Speaker 1: on par with the Nintendo Entertainment system that wouldn't come

871
00:51:20,600 --> 00:51:24,160
Speaker 1: out in the U S till But before Atari could

872
00:51:24,160 --> 00:51:27,080
Speaker 1: go into full production on the seventy eight hundred, Warner

873
00:51:27,160 --> 00:51:32,239
Speaker 1: Communications sold off the Atari home video game division to

874
00:51:32,880 --> 00:51:38,399
Speaker 1: Jack Trammel, who had previously founded Commodore and had subsequently

875
00:51:38,520 --> 00:51:42,440
Speaker 1: entered into a bitter feud with Commodore. Now, I've covered

876
00:51:42,560 --> 00:51:45,480
Speaker 1: the story of Atari elsewhere. I've also covered the story

877
00:51:45,480 --> 00:51:47,600
Speaker 1: of Commodore elsewhere, so I'm not going to go into

878
00:51:47,640 --> 00:51:50,160
Speaker 1: all of that except to say that the seventy eight

879
00:51:50,280 --> 00:51:54,280
Speaker 1: hundred was a casualty as a result of Atari changing

880
00:51:54,400 --> 00:51:58,440
Speaker 1: hands from Warner Communications to Jack Trammel. But the recession

881
00:51:58,520 --> 00:52:02,839
Speaker 1: reached beyond Atari itself. Kaliko decided to develop a home

882
00:52:02,880 --> 00:52:07,480
Speaker 1: computer expansion for the Clico Vision. This one was called Adam,

883
00:52:07,520 --> 00:52:09,520
Speaker 1: and they were attempting to get into the home computer

884
00:52:09,600 --> 00:52:12,920
Speaker 1: market while keeping a toe in the video game industry.

885
00:52:13,000 --> 00:52:17,319
Speaker 1: But Adam turned into a flop, really expensive flop, and

886
00:52:17,320 --> 00:52:22,320
Speaker 1: then Calico got out of the business entirely. Mattel, after

887
00:52:22,360 --> 00:52:25,040
Speaker 1: the failure of the in television, to decide to extricate

888
00:52:25,040 --> 00:52:27,520
Speaker 1: itself from the home video game market as well eventually

889
00:52:27,560 --> 00:52:31,480
Speaker 1: sold those assets off to other companies, and meanwhile, video

890
00:52:31,520 --> 00:52:34,000
Speaker 1: game developers were going out a business left and right.

891
00:52:34,120 --> 00:52:36,799
Speaker 1: A lot of companies that made super cheap games were

892
00:52:36,800 --> 00:52:39,560
Speaker 1: gone first because they were a victim of that retail

893
00:52:39,680 --> 00:52:44,000
Speaker 1: arrangement I mentioned earlier. The Magic had to change its plans.

894
00:52:44,080 --> 00:52:46,800
Speaker 1: It had been heading for an initial public offering or

895
00:52:46,840 --> 00:52:49,160
Speaker 1: i p O. That's when a company goes from being

896
00:52:49,200 --> 00:52:52,080
Speaker 1: a private company to a publicly traded company on the

897
00:52:52,160 --> 00:52:56,640
Speaker 1: on a stock market. But after the Warner Communications stock

898
00:52:56,800 --> 00:52:59,800
Speaker 1: took a dive, a Magic put those plans on hold,

899
00:53:00,360 --> 00:53:03,680
Speaker 1: and eventually the company folded, largely also because of that

900
00:53:03,800 --> 00:53:07,920
Speaker 1: retail issue. While that shareholder call could be pointed to

901
00:53:08,480 --> 00:53:12,359
Speaker 1: as the inciting incident for the video game crash, it

902
00:53:12,440 --> 00:53:15,720
Speaker 1: wasn't as if the market collapsed entirely overnight. It actually

903
00:53:15,800 --> 00:53:18,759
Speaker 1: was drawn out over a couple of years. But the

904
00:53:18,800 --> 00:53:22,520
Speaker 1: writing was on the wall. Retailers became skeptical of video

905
00:53:22,560 --> 00:53:26,399
Speaker 1: games in general. After many of the questionable developers went

906
00:53:26,400 --> 00:53:28,840
Speaker 1: out of business. It meant that a lot of retail

907
00:53:28,880 --> 00:53:31,560
Speaker 1: companies were left holding onto stock that they couldn't send

908
00:53:31,600 --> 00:53:34,880
Speaker 1: back because there was no back right. The companies that

909
00:53:35,200 --> 00:53:38,480
Speaker 1: had made those games didn't exist anymore. So that's when

910
00:53:38,520 --> 00:53:42,759
Speaker 1: you started seeing retailers create these enormous bargain bins where

911
00:53:42,800 --> 00:53:46,680
Speaker 1: they were selling cartridges at like a dollar each or something.

912
00:53:47,280 --> 00:53:49,400
Speaker 1: And these were a lot of these were like just

913
00:53:49,480 --> 00:53:53,520
Speaker 1: the worst games, the lowest quality stuff, because again, the

914
00:53:53,560 --> 00:53:57,200
Speaker 1: companies that had made them no longer existed. Uh not

915
00:53:57,480 --> 00:54:00,480
Speaker 1: not a great ad for you to go out by them.

916
00:54:00,520 --> 00:54:02,440
Speaker 1: And meanwhile the retailers are just trying to get rid

917
00:54:02,480 --> 00:54:05,319
Speaker 1: of them, to get them out of the stores. Uh.

918
00:54:05,400 --> 00:54:08,600
Speaker 1: This was this, This created just like a bad feeling

919
00:54:08,719 --> 00:54:13,120
Speaker 1: for everybody, the consumers and the retailers. And I would

920
00:54:13,120 --> 00:54:15,319
Speaker 1: say that the video game crash really happened for a

921
00:54:15,360 --> 00:54:18,760
Speaker 1: lot of these reasons. A big one was that retailer agreement,

922
00:54:19,320 --> 00:54:21,560
Speaker 1: the fact that retailers fell into the same traps that

923
00:54:21,640 --> 00:54:24,399
Speaker 1: investors did. They overestimated the profit that they would make

924
00:54:24,880 --> 00:54:28,279
Speaker 1: coming from these games, so overestimating the market was a

925
00:54:28,320 --> 00:54:32,520
Speaker 1: big part of it. And that the retailers, as a

926
00:54:32,600 --> 00:54:36,239
Speaker 1: result of getting burned by this, were less interested in

927
00:54:36,520 --> 00:54:40,080
Speaker 1: carrying and promoting home video game consoles. And meanwhile the

928
00:54:40,080 --> 00:54:42,879
Speaker 1: consumers were thinking, well, really, the problem here is that

929
00:54:43,719 --> 00:54:46,360
Speaker 1: I want something that looks a little better. The arcades

930
00:54:46,400 --> 00:54:48,759
Speaker 1: had been getting better and better. The arcade games have

931
00:54:48,800 --> 00:54:51,400
Speaker 1: been getting better and better. The arcades themselves would have

932
00:54:51,480 --> 00:54:55,720
Speaker 1: their own massive recession, but the home market wasn't getting

933
00:54:55,719 --> 00:54:59,360
Speaker 1: better because you were still using the same old console hardware.

934
00:54:59,719 --> 00:55:03,879
Speaker 1: If Atari had introduced the hundred a year or two

935
00:55:03,960 --> 00:55:07,759
Speaker 1: earlier than it did, then things probably would have been

936
00:55:07,800 --> 00:55:10,200
Speaker 1: a lot different, or at least they potentially could have

937
00:55:10,239 --> 00:55:13,759
Speaker 1: been a lot different. Instead, it took Nintendo coming over

938
00:55:14,239 --> 00:55:19,040
Speaker 1: and introducing the Nintendo Entertainment System to revitalize the video

939
00:55:19,040 --> 00:55:22,880
Speaker 1: game market here in the United States. Uh And famously,

940
00:55:22,880 --> 00:55:26,880
Speaker 1: when Nintendo did that, they would pair the NES with

941
00:55:27,000 --> 00:55:29,760
Speaker 1: a robot in order to try and sell it as

942
00:55:29,800 --> 00:55:34,319
Speaker 1: a toy in toy stores because toy stores were not

943
00:55:34,440 --> 00:55:37,400
Speaker 1: super eager to hold video game consoles because of the

944
00:55:37,400 --> 00:55:40,000
Speaker 1: issues I just said, a lot of the problems that

945
00:55:40,080 --> 00:55:43,560
Speaker 1: led to this crash were kind of self fulfilling. It

946
00:55:43,680 --> 00:55:49,399
Speaker 1: was this vicious cycle of of issues that collectively created

947
00:55:49,440 --> 00:55:53,080
Speaker 1: this market collapse. So, yeah, it's a little too simplistic

948
00:55:53,120 --> 00:55:58,719
Speaker 1: to say et killed video games in America. That's not accurate.

949
00:55:59,480 --> 00:56:04,480
Speaker 1: It was one aspect of lots of different things that

950
00:56:04,560 --> 00:56:10,359
Speaker 1: collectively lead to the dissolution of video games for a

951
00:56:10,440 --> 00:56:12,919
Speaker 1: good two years in the United States. In other parts

952
00:56:12,920 --> 00:56:14,759
Speaker 1: of the world, by the way, this was not the

953
00:56:14,800 --> 00:56:19,160
Speaker 1: case like in Europe and Japan, the video game industry

954
00:56:19,160 --> 00:56:21,520
Speaker 1: didn't have this massive recession the way it did here

955
00:56:21,520 --> 00:56:25,480
Speaker 1: in the States. But yeah, that is a story about

956
00:56:25,560 --> 00:56:29,000
Speaker 1: the three video game crash. Hope you enjoyed it. If

957
00:56:29,040 --> 00:56:31,239
Speaker 1: you have suggestions for topics that I should cover in

958
00:56:31,239 --> 00:56:34,319
Speaker 1: future episodes of tech Stuff, please reach out to me

959
00:56:34,360 --> 00:56:36,560
Speaker 1: and let me know. The best way to do that

960
00:56:37,000 --> 00:56:39,520
Speaker 1: is on Twitter. The handle for the show is text

961
00:56:39,560 --> 00:56:43,320
Speaker 1: Stuff H s W and I'll talk to you again

962
00:56:44,200 --> 00:56:48,200
Speaker 1: really soon. I gotta go over to Jimmy Bob's video

963
00:56:48,239 --> 00:56:59,200
Speaker 1: game Emporium first return this broken copy of Pitfall. Text

964
00:56:59,200 --> 00:57:02,640
Speaker 1: Stuff is an I Heart Radio production. For more podcasts

965
00:57:02,680 --> 00:57:05,440
Speaker 1: from I Heart Radio, visit the i Heart Radio app,

966
00:57:05,560 --> 00:57:08,720
Speaker 1: Apple Podcasts, or wherever you listen to your favorite shows.