Speaker 1: Welcome to Tech Stuff, a production from I Heart Radio.
Speaker 1: Hey there, and welcome to tech Stuff. I'm your host,
Speaker 1: Jonathan Strickland. I'm an executive producer with I Heart Radio.
Speaker 1: It all love all things tech, and you know, back
Speaker 1: in two, Chris Pallette, my original co host, and I
Speaker 1: did a short episode about the video game crash of
Speaker 1: nineteen eighty three. But I think we fell into some
Speaker 1: traps that a lot of people fall into when they
Speaker 1: talk about that, and I figured that we could probably
Speaker 1: go back to a deeper dive in this episode and
Speaker 1: learn about how that all happened. Now, the super short
Speaker 1: version of the story is that here in the United States,
Speaker 1: the home video game market went into a recession after
Speaker 1: it became oversaturated. It was built on a faulty business model,
Speaker 1: really a faulty distribution mode atle which we'll talk about.
Speaker 1: Investors lost confidence in the companies involved, and the entire industry,
Speaker 1: mostly concentrated in a single company, collapsed under its own weight. Now,
Speaker 1: some people given even shorter version, effectively blaming a pair
Speaker 1: of Atari cartridges for the whole thing. But as we'll see,
Speaker 1: that ends up being a little bit reductive, but seemed
Speaker 1: like it would have been a great year for games.
Speaker 1: I mean, if you look at the arcades, Dragons Layer
Speaker 1: and Space Ace, both video games with full hand drawn
Speaker 1: animation from Don Bluth stored on laser disc. They made
Speaker 1: a big splash that year. This was despite the fact
Speaker 1: that player interaction in those games is just limited to
Speaker 1: responding to timed events and pushing on a joystick in
Speaker 1: a particular direction or hitting a button. Um, but you're
Speaker 1: not controlling animated characters the entire time. It's literally like, oh,
Speaker 1: the screen flash to push left. Uh. The Star Wars
Speaker 1: Arcade Machine also came out in nineteen eighty three. That
Speaker 1: one had vector color graphics and lines from the movie.
Speaker 1: By the way, that game remains one of my favorite
Speaker 1: arcade games of all time. Likewise, Spy Hunter another game
Speaker 1: that I consider a top arcade game of all time.
Speaker 1: That one came out in nineteen eighty three. That's the
Speaker 1: game where you control a car. You have an overhead
Speaker 1: view you're controlling of cars that goes down the highway
Speaker 1: and the car's got like all these spy gadgets kidded
Speaker 1: out into it, or it can get them by you know,
Speaker 1: docking with a a U a semitruck that's also on
Speaker 1: the road and you have to shoot bad guys and stuff.
Speaker 1: Super cool game. And a lot of other big titles
Speaker 1: came out that year, like Discs of Tron, Elevator Action,
Speaker 1: Junior pac Man, and Crawl. Okay, so that last one
Speaker 1: wasn't exactly a class arcade game, but it was an
Speaker 1: arcade die in with a science fiction fantasy film that
Speaker 1: I've got a soft spot for. All Right, So we
Speaker 1: can't just jump into nine or even nineteen eighty and
Speaker 1: expect to have a full understanding of what led to
Speaker 1: the industry crash. We really need to understand how this
Speaker 1: all got started in the first place. So we're gonna
Speaker 1: do a quick overview of the birth and evolution of
Speaker 1: video games, both for home consoles and for the arcades,
Speaker 1: because they are tied together somewhat um And also, arcades
Speaker 1: were a thing too once upon a time, just in
Speaker 1: case you weren't aware. I mean, there are some arcades
Speaker 1: still in existence, particularly outside the United States, and you've
Speaker 1: got your stuff like David Busters and whatever, but it's
Speaker 1: not like the old days insert old time and music here. Now.
Speaker 1: Before even the old days, there was a physicist named
Speaker 1: William Higginbotham uh, and this cat was an interesting fellow.
Speaker 1: For one thing, he was a scientist at the Los
Speaker 1: Alamos National Laboratory during World War Two and was part
Speaker 1: of the group that developed the atomic bomb. He worked
Speaker 1: on the electronic side of things, you know, rather than
Speaker 1: the stuff what goes boom side of things. But of
Speaker 1: course all these groups were working together with a common
Speaker 1: goal in mind. Anyway, he was part of the team
Speaker 1: that brought upon us the era of nuclear weapons. He
Speaker 1: also campaigned hard for the world to you know, not
Speaker 1: go ham on nuclear weapons and build them all over
Speaker 1: the place. Also, I should point out that it's not
Speaker 1: like the United States was the only country working toward
Speaker 1: nuclear weapons. And I don't mean to suggest that if
Speaker 1: the US hadn't developed the atomic bomb, no one else
Speaker 1: would have done it. Uh, that surely would have happened.
Speaker 1: It's just that's how history played out, all right. So
Speaker 1: let's get back to the video games, though. So Hagin
Speaker 1: Botham goes to work for the brook Haveven National Laboratory
Speaker 1: after the war, and he worked in a department called Instrumentation,
Speaker 1: and this department built various cathode ray tube or CRT
Speaker 1: displays intended for radar systems. Well, in ninete fifty eight,
Speaker 1: he's told he's gonna create an exhibit to show off
Speaker 1: to people whenever they're touring the lab. And he's like,
Speaker 1: we use systems to display stuff on screens. It's not
Speaker 1: very exciting. I mean, it's radar systems, and unless you've
Speaker 1: got something to pick up, it's you're just looking at
Speaker 1: a screen. So he gets an idea. See, the team
Speaker 1: was using oscilloscopes, and oscilloscopes are used to display wave
Speaker 1: forms of various signals. So when a scilloscope can show
Speaker 1: stuff like a signal's frequency and amplitude, among other things,
Speaker 1: and most importantly for this podcast, it can plot curved lines.
Speaker 1: And when paired with an analog computer that Higginbotham's department had,
Speaker 1: it gave the physicist a chance to design a very
Speaker 1: simple tennis game. A technician named Robert Davorak took Higginbotham's
Speaker 1: plans and built the exhibit, and Higginbotham called it Tennis
Speaker 1: for two. This was in nineteen fifty eight. That's more
Speaker 1: than a decade before we'd see a refined version of
Speaker 1: this called Pong. But the game was different from pong
Speaker 1: in other ways, as well, so pong uses a top
Speaker 1: down view. For the table tennis game, players take control
Speaker 1: of bars that act kind of like paddles or rackets.
Speaker 1: Typically they're taking control on the left and right sides
Speaker 1: of the screen, and it's like you're looking down on
Speaker 1: top of a of a table tennis board and you
Speaker 1: you move these these bars, these paddles up and down
Speaker 1: the screen on your side in order to hit a
Speaker 1: ball back and forth. When the ball encounters either the
Speaker 1: top or bottom edge of the screen, it bounces off
Speaker 1: and heads towards you know, whichever direction it was going.
Speaker 1: But Tennis for two only had two lines in It
Speaker 1: had a line along the bottom of the screen which
Speaker 1: represented the ground, and halfway across the length of this
Speaker 1: line was a short vertical line extending up, so this
Speaker 1: represented the net. So it's like you're looking at a
Speaker 1: tennis court in profile. Players had a dial which allowed
Speaker 1: them to set the angle of the ball, and then
Speaker 1: a butt and you would push the button when the
Speaker 1: ball entered your side of the court, and you would
Speaker 1: use the dial to set the angle of your strike.
Speaker 1: There were no paddles or anything like that on the screen.
Speaker 1: Higginbotham didn't really do anything else with this idea. It
Speaker 1: was just kind of to demonstrate the technology, and even
Speaker 1: though it got a lot of attention, he didn't really
Speaker 1: see any application for it beyond that. Now you could
Speaker 1: argue this was the first video game, but it was
Speaker 1: never a commercial product. But flash forward to the nineteen sixties.
Speaker 1: An engineer named Ralph Bear was working for a company
Speaker 1: called Sanders Associates, Incorporated. He was exploring how the company
Speaker 1: might make a companion technology for the television, which had
Speaker 1: proven to be quite popular by the nineteen sixties. So
Speaker 1: the idea was that most folks already had a TV,
Speaker 1: and so creating something that could expand the capabilities of
Speaker 1: a TV would tap into a pre existing market, a
Speaker 1: market that already was proven to have spent money on
Speaker 1: a appliance as expensive as a television. So there and
Speaker 1: two bills, Bill Rush and Bill Harrison began developing a
Speaker 1: box you could connect to a television that would allow
Speaker 1: you to play games on the TV. And the engineers
Speaker 1: built a few prototypes, and we typically referred to them
Speaker 1: as the brown boxes because they were covered in a
Speaker 1: veneer that made them look like they were made out
Speaker 1: of wood. They created a version of table tennis that
Speaker 1: used controllers with three knobs and a button on them.
Speaker 1: The knobs or dials controlled the paddles and the ball
Speaker 1: itself in fact, so one dial was to control the
Speaker 1: horizontal movement of a paddle. And remember this is a
Speaker 1: table tennis that you're looking at either the left side
Speaker 1: or the right side of the screen, So by controlling
Speaker 1: your horizontal movement, you can move closer to or further
Speaker 1: away from the net in the center or the center line.
Speaker 1: And then the second dial controlled the vertical movement of
Speaker 1: the paddle, so that lets you move up and down
Speaker 1: in order to intercept the ball before it would pass
Speaker 1: you and go beyond your side. And then the third
Speaker 1: dial would actually control the movement of the ball itself,
Speaker 1: so once your paddle had hit the ball, you could
Speaker 1: use this third dial to put quote unquote English on
Speaker 1: the ball after you'd already hit it. So not really realistic,
Speaker 1: but you can control the path of the ball by
Speaker 1: turning this dial, so you can make it go up
Speaker 1: or down, or you can make it go up and
Speaker 1: down really fast as you're heading towards the other side,
Speaker 1: in an effort to make sure your opponent can't hit it.
Speaker 1: So you could actually skew the direction of the ball
Speaker 1: as it left your paddle. If your opponent managed to
Speaker 1: hit the ball well, then you would no longer be
Speaker 1: able to control its movement. You wouldn't want to anyway,
Speaker 1: because you would be, you know, focusing too much on
Speaker 1: trying to make sure you move your paddle in the
Speaker 1: right spot to intercept the returning ball. So Sanders Associates
Speaker 1: filed a patent on this design and got it, and
Speaker 1: they looked for buyers, and a company called Magnavox, that's
Speaker 1: a company I should cover in depth at some point
Speaker 1: licensed this design in nine and began working on a
Speaker 1: consumer version of the prototype technology. And this would become
Speaker 1: the first Magnavox Odyssey console, which essentially played table tennis
Speaker 1: without being able to keep score. That you had to
Speaker 1: keep score, you know, on your own. Uh. The Magnavox
Speaker 1: Odyssey came out in September nineteen seventy two. The console
Speaker 1: could accept game cards. These were printed circuit boards that
Speaker 1: were kind of like a proto cartridge. UH. The cards
Speaker 1: modified how the console would send signals to a television
Speaker 1: and how it would interpret inputs, which gave the players
Speaker 1: a few different game types that were all mostly based
Speaker 1: off of table tennis. Magnavox even created the first video
Speaker 1: game console peripheral. For an extra charge, you could buy
Speaker 1: a light gun that you could use with some basic
Speaker 1: shooting games. Again, um, just like you know, they would
Speaker 1: display a white square in your TV and you would
Speaker 1: aim the light gun to it, pull the trigger, and
Speaker 1: if it had detected that the white square was in
Speaker 1: the sight of the gun, then it counted as a hit. Well,
Speaker 1: the Odyssey would enjoy some modest success. Some would say
Speaker 1: it was actually a failure. It would eventually sell around
Speaker 1: three units when all of a sudden done, but early
Speaker 1: on it wasn't making that much of an impact, except
Speaker 1: it would have a huge impact on the history of
Speaker 1: video games, just not necessarily on the consumer market right
Speaker 1: off the go, because one person who saw the Magnavox
Speaker 1: Odyssey and Action was Nolan Bushnell. Now Bushnell and his
Speaker 1: partner Ted Dabney had created the first arcade video game
Speaker 1: in nine under a company that was called Scissor G.
Speaker 1: And this arcade game was called Computer Space, And in turn,
Speaker 1: this was based off a game that had been created
Speaker 1: by folks at M I T way back in nineteen
Speaker 1: sixty two. Called Space War. Now I emphasized that title
Speaker 1: because the actual title has an exclamation point after the
Speaker 1: word space War. Anyway, computer Space was largely an adaptation
Speaker 1: of Space War, and it would become the first commercial
Speaker 1: arcade game, but it wasn't particularly successful. However, Bushnell thought
Speaker 1: there's gonna be a big business in video games, and
Speaker 1: so he was convinced that they needed to stick with
Speaker 1: this kind of this market. So he goes off and
Speaker 1: then found the company Atari, specifically with the goal of
Speaker 1: creating games that the company would then license to manufacturers.
Speaker 1: So the original idea was that Atari would create the
Speaker 1: i P and would program a game, but then effectively
Speaker 1: sell that design to some established gaming company like Bally
Speaker 1: or Williams. Bushnell hired on an engineer named Alan Alcorn. Now,
Speaker 1: the video game world is really young at this point,
Speaker 1: like pretty much the only people who have made any
Speaker 1: games were engineers and programmers who are really just trying
Speaker 1: to create fun ways to misuse company or research lab
Speaker 1: or university property. Like, they weren't games for the general public.
Speaker 1: They were typically making games for themselves and for the
Speaker 1: folks who worked closely with them. And Alcorn had no
Speaker 1: experience in creating games. So Bushnell decided to give him
Speaker 1: the assignment of making a table tennis game similar to
Speaker 1: the Magnavox Odyssey home console game, but this time in
Speaker 1: arcade format, so not a home console, but like an
Speaker 1: arcade cabinet that you would encounter in a place like
Speaker 1: a theater or a bar, because this isn't the time
Speaker 1: before arcades themselves, so this was kind of like a
Speaker 1: programming exercise for Alcorn. So Alcorn pretty much reinvents the
Speaker 1: table tennis game we saw with the Magnavox Odyssey, which
Speaker 1: again Bushnell had actually had a chance to see in
Speaker 1: person before it was released, and Uh and Pong would
Speaker 1: be the result of this. He created an interesting variation
Speaker 1: on this table tennis game. For one thing, it could
Speaker 1: keep score so you didn't have remember it. For another,
Speaker 1: he went so far as to program the little bars
Speaker 1: that act like your paddles or your your rackets. They
Speaker 1: actually have computationally different angled surfaces along the front of
Speaker 1: the bar. So that's just mathematics at this point. So
Speaker 1: by that, I mean if you were to look at them,
Speaker 1: they would be rectangular, right they don't. They wouldn't look angular.
Speaker 1: They're just the rectangles but mathematically there are different sections
Speaker 1: of the bar that act like a slightly different angle
Speaker 1: of attack of a paddle. So if you hit the
Speaker 1: ball smack dab in the middle of your um, your
Speaker 1: your paddle, you would have a pretty simple deflection. If
Speaker 1: it was coming straight at you and you hit it
Speaker 1: right dead in the center, it would go straight back um.
Speaker 1: If it was coming at an angle, then it would
Speaker 1: bounce off at a ninety degree angle deflection. But if
Speaker 1: it hit other parts of the bar, like toward the end,
Speaker 1: they would have a more severe deflection, a sharper angle.
Speaker 1: So where you hit the ball with your paddle would
Speaker 1: change the way the ball flew back towards your opponent.
Speaker 1: It was neat that he was able to mathematically do
Speaker 1: this anyway. Atari would choose to manufacture pong itself rather
Speaker 1: than license it to some other company. There's this whole
Speaker 1: story about how Atari had approached a couple of different
Speaker 1: companies about the possibility of making pong and then told
Speaker 1: each of the companies, Hey, it turns out the other
Speaker 1: guys aren't interested in making this for us, which then
Speaker 1: discouraged the company. So they backed out that that was
Speaker 1: Atri's plan because they wanted to make it themselves, but
Speaker 1: they first had to get out of this commitment that
Speaker 1: they were going to make it for some other company.
Speaker 1: So they did that. They went out and they got
Speaker 1: a line of credit in order to produce this. Because
Speaker 1: Atari was still a very young company, didn't have a
Speaker 1: lot of money, and manufacturing an arcade machine is expensive.
Speaker 1: You have to go through the whole manufacturing process, so
Speaker 1: this was a big risk, but it paid off. Pong
Speaker 1: would become the first commercially successful arcade game. It would
Speaker 1: also prompt Magnavox to sue Atari for patent infringement, saying, hey,
Speaker 1: we paid for this patent and you clearly have copied it,
Speaker 1: so what's up with that. This lawsuit would eventually get
Speaker 1: settled out of court. Now, Atari would subsequently make its
Speaker 1: own table tennis video game console, which it called, fittingly enough,
Speaker 1: Home Pong. They released that console in the original Odyssey
Speaker 1: had been on the market for a few years at
Speaker 1: that point, and Atari would sell around a hundred fifties
Speaker 1: thousand units all told, so, you know, still not a
Speaker 1: huge number in the grand scheme of things. Now, Pong
Speaker 1: the arcade game was wildly successful, and you can kind
Speaker 1: of understand why I mean, the game is simple, so
Speaker 1: it's really easy to understand how to play, unlike say
Speaker 1: Computer Space, which was notoriously complicated. It only costs to
Speaker 1: play Pong for a session, whereas home consoles were upwards
Speaker 1: of a hundred dollars, and when we adjust for inflation,
Speaker 1: that's around the same as six hundred twenty bucks today.
Speaker 1: So while the home consoles were moving okay, the arcade
Speaker 1: was doing a little bit better. Between nineteen seventy two
Speaker 1: and nineteen seventy seven, pretty much all the video game
Speaker 1: home consoles were focused mainly on table tennis, are games
Speaker 1: that were very slight variations on table tennis, So in
Speaker 1: other words, everything was Pong pretty much like it may
Speaker 1: not be called Pong because that was an Atari thing,
Speaker 1: but they were all essentially Pong. So there were numerous
Speaker 1: copycats out there, and there was a massive oversaturation of
Speaker 1: first generation consoles, and they pretty much all played Pong
Speaker 1: or some variation of that, and by nineteen seventy seven
Speaker 1: that had all played out. Dozens of companies that had
Speaker 1: jumped into the market in an effort to cash in
Speaker 1: on what was seen as a craze found themselves over
Speaker 1: extended and many of them would go out of business,
Speaker 1: and it was a tough sell. I mean, a lot
Speaker 1: of folks who were interested in video table tennis had
Speaker 1: already bought a console, and since all the consoles offered
Speaker 1: more or less what wasn't a largely identical experience, there
Speaker 1: wasn't much reason to go out and buy another one. Right,
Speaker 1: you already have a Pong machine. You don't need another one,
Speaker 1: So why would you shell out a hundred dollars or
Speaker 1: more to buy something that you essentially already have. So
Speaker 1: the arcade game business wasn't in much better shape at
Speaker 1: this point. While Pong had been a high point in
Speaker 1: the arcade industry, there was a real lag and innovation
Speaker 1: in the arcade space, and so the whole industry, consoles
Speaker 1: and arcade went into a bit of a recession. In
Speaker 1: by in the night a game would come out that
Speaker 1: would breathe new life into the arcade industry and later
Speaker 1: on into the home video game market. We'll find out
Speaker 1: which game that was when we come back from this
Speaker 1: short break. Okay. So there was this early glut of
Speaker 1: table tennis based video game consoles in the early to
Speaker 1: mid seventies, and that market ultimately collapsed By the time
Speaker 1: the dust had cleared, only a few companies were still
Speaker 1: in that market. Atari was one of them. Atari had
Speaker 1: continued making arcade machines as well as some consoles and
Speaker 1: handheld devices as well. You probably wouldn't be surprised to
Speaker 1: learn that a lot of those still remained kind of
Speaker 1: Pong inspired, because that game had been such a big
Speaker 1: success for Atari. It was something that the company was
Speaker 1: leaning on. Some of the other titles that were uh
Speaker 1: the Atari was producing we're racing game titles. They had
Speaker 1: a couple of military games, like some games where you
Speaker 1: would control a tank or a jet fighter game. Also,
Speaker 1: in nineteen seventy six, Bushnell made a deal to sell
Speaker 1: Atari to Warner Communications, and he stayed on for a
Speaker 1: short while anyway, to continue to lead Atari. But lots
Speaker 1: of other companies that tried to cash in on the
Speaker 1: video tape old tennis trend. We're not so fortunate. And
Speaker 1: once the market was saturated, you know, once pretty much
Speaker 1: all the folks who one of one of these things
Speaker 1: had one, there was nowhere to go. Plus, the second
Speaker 1: generation of consoles were beginning to come out, and that
Speaker 1: was the real nail in the coffin, and a big
Speaker 1: change with these consoles is that these were predominantly cartridge based.
Speaker 1: So instead of hardwiring games into the console itself, where
Speaker 1: the console is limited to which every games were programmed
Speaker 1: onto the the actual circuit boards of the console. Programmers
Speaker 1: were designing games that a company would print onto a
Speaker 1: circuit board that was housed inside a cartridge. You would
Speaker 1: plug the cartridge into a console and the console could
Speaker 1: run the game. So this was kind of like if
Speaker 1: you were actually physically switching out part of a circuit
Speaker 1: board in the console every time you were playing a game.
Speaker 1: That's effectively what you were doing. The games were all
Speaker 1: written in ROM format. ROM stands for read only memory.
Speaker 1: That means that a machine can only pull from the
Speaker 1: data that's stored on that cartridge. It cannot change or
Speaker 1: overwrite that data. RAM memory is non volatile, meaning the
Speaker 1: game would always exist on that cartridge unless you were
Speaker 1: to actually physically damage the cartridge itself. It's it is
Speaker 1: a physical program on a circuit board. Now, this switch
Speaker 1: to cartridges allowed companies to make consoles that could run
Speaker 1: any number of games. You just had to program it
Speaker 1: onto a ROM and have that housed in a cartridge
Speaker 1: and have it be compatible with the machine. Then you
Speaker 1: were off to the races. And in the beginning, each
Speaker 1: company making a console had its own game titles, like
Speaker 1: they were producing their own games. So a few of
Speaker 1: the big consoles to come out around that time, where
Speaker 1: the Callika Vision it was actually one of the later ones,
Speaker 1: Mattel's in television, the Magnavox Odyssey to which was a
Speaker 1: cartridge based game console, and of course the giant in
Speaker 1: the space, the Atari Video Computer System or VCS, better
Speaker 1: known to me at least as the Atari twenty hundred.
Speaker 1: Now there were other consoles as well. Um. In fact,
Speaker 1: sometimes people cite that as one of the reasons for
Speaker 1: the video game crash, as we'll learn not so much.
Speaker 1: And really these four consoles were the most popular by far,
Speaker 1: and the Attori twenty hundred commanded the overwhelming share of
Speaker 1: the market. Um depending upon which source you look at,
Speaker 1: Atari would ultimately sell between twenty five million and thirty
Speaker 1: million at twenty units. So that's a lot, especially when
Speaker 1: you look at second place in television, which depending upon
Speaker 1: which source you're looking at, sold between two and three
Speaker 1: million units, so twenty to thirty million units for they
Speaker 1: two to three million for second place, which was in television.
Speaker 1: Atari was the home video game market in in many
Speaker 1: respects Now, I should also add that the Atari twenty
Speaker 1: six it came out a year before The Odyssey to,
Speaker 1: two years before in television, and five years before the
Speaker 1: Collique of Vision, so it really had a head start
Speaker 1: in the market when you compare it to the others. Now,
Speaker 1: the sold okay at launch. It didn't. It didn't do
Speaker 1: badly when it debuted in ninety seven, but it also
Speaker 1: was not a runaway hit. It wasn't like a viral
Speaker 1: marketing sensation. It retailed for just under two hundred dollars,
Speaker 1: so when you adjust that for inflation, it would be
Speaker 1: more than eight hundred bucks today. So when you look
Speaker 1: at a console and you see that's like six hundred
Speaker 1: dollars and you think, wow, that's expensive, keep in mind
Speaker 1: the Atari twenty hundred when it first debuted was sold
Speaker 1: for the equivalent of eight hundred dollars today. And I
Speaker 1: had one of these things, and I think about how
Speaker 1: much my parents must have had to save to give
Speaker 1: me that. Now, granted I got mine a little later
Speaker 1: in the life cycle, it probably wasn't sold at the
Speaker 1: full two d dollars. But still my parents were teachers. Anyway,
Speaker 1: I don't mean to turn this into a Jonathan realizes
Speaker 1: how many sacrifices as parents made podcast. It was expensive
Speaker 1: and despite the cartridge approach providing you know, way more
Speaker 1: options than what you would find with first generation consoles,
Speaker 1: it was a bit of a slow burn. I mean
Speaker 1: you had to remember also that this was this required
Speaker 1: a change in consumer thinking, right because consumers before, yeah,
Speaker 1: they were limited to whatever games were hardwired on a console,
Speaker 1: but they didn't have any other purchases to make once
Speaker 1: they bought the console, unless they were getting a peripheral
Speaker 1: that everything was in the box. But with this model,
Speaker 1: you bought the system, but then you had to buy games.
Speaker 1: You know, you had additional purchase costs on top of
Speaker 1: the system itself. Now, before the break, I alluded to
Speaker 1: an arcade game that would revive the arcade industry and
Speaker 1: subsequently really put a spark in the home video game market.
Speaker 1: That game came from a Japanese company called Tito, and
Speaker 1: it was a little game called Space and eight Ers.
Speaker 1: This game came out for the arcades in nineteen seventy eight,
Speaker 1: so the year after the VCS or came out and
Speaker 1: it was a huge hit. And in the game, you
Speaker 1: just you shoot down blocks of aliens that are flying
Speaker 1: overhead and they scroll left and right, and they dropped
Speaker 1: down a line. Each time they get to the edge
Speaker 1: of a screen, they descend towards you. It's pretty simple game,
Speaker 1: but it became an instant classic. Now the folks that Attari,
Speaker 1: we're paying attention, not Bushnell. At this point he had
Speaker 1: actually either been fired or he quit in nine. How
Speaker 1: that unfolded really depends upon whom you ask, because different
Speaker 1: people have a different explanation for that. And Atari engineers
Speaker 1: were working on what was supposed to come after the
Speaker 1: Atred because when the company first launched the console in nineteen,
Speaker 1: they did it with a plan to replace it with
Speaker 1: a newer piece of hardware within three years. So like
Speaker 1: when they launched seventy seven, they thought, in eight, we're
Speaker 1: going to come out with the next generation of this
Speaker 1: hardware and it will be more powerful and have more capabilities.
Speaker 1: But things would not work out that way, seeing in
Speaker 1: eight Atari published a port of Space Invaders, a pretty
Speaker 1: decent port, and it would go on to become the
Speaker 1: second most popular AT twenty game in its history. We'll
Speaker 1: talk about what was number one a little bit later. Now,
Speaker 1: people were eager to have the experience of playing Space
Speaker 1: Invaders at home. I mean, this was a game where
Speaker 1: typically you would have to go someplace like a theater
Speaker 1: or a bar or something in order to play it.
Speaker 1: Eventually you would be able to go to arcades and
Speaker 1: play it, and this would really see a tight relationship
Speaker 1: formed between the arcade and home markets. Console companies began
Speaker 1: to see the value in licensing popular arcade titles for
Speaker 1: home markets, and arcade developers saw the added value of
Speaker 1: bringing in revenue by licensing their intellectual property to the
Speaker 1: video game companies. So it became kind of a symbiotic relationship.
Speaker 1: At first, it's some foreshadowing. So starting around at sales
Speaker 1: start to pick up and the folks at Warner Communications,
Speaker 1: remember Warner had purchased Atari in nineteen seventy six. They
Speaker 1: were encouraged by this, and it also meant that there
Speaker 1: was still life in the at Remember, the plan was
Speaker 1: to phase it out in nineteen eighty and to have
Speaker 1: a new kind of hardware come on the scene. But
Speaker 1: now they were seeing more and more sales, which meant
Speaker 1: the company decided to push back plans to introduce new,
Speaker 1: more powerful consoles. Why would you spend cash to produce
Speaker 1: something new if you can still move units of something
Speaker 1: that you're already making, alright, But something else that was
Speaker 1: going on around this same time, and it's a big
Speaker 1: part of it. This was the birth of the independent developer. Now.
Speaker 1: I mentioned earlier that at first, each console company was
Speaker 1: responsible for putting out games on its system, So the
Speaker 1: Atari cartridges came from Atari. Atari was the company that
Speaker 1: both made the console and made the games. But then
Speaker 1: things changed, and they changed largely because of how Atari
Speaker 1: was conducting business under Warner Communications. For one thing, Atari
Speaker 1: wasn't paying out bonuses or royalties. You were paid a
Speaker 1: salary and it didn't matter if the game you made
Speaker 1: flopped or if it was a huge hit. You made
Speaker 1: the same amount. So you could make a game that
Speaker 1: would make the company millions of dollars, but you wouldn't
Speaker 1: see any of that cash. Also, if you worked for Atari,
Speaker 1: the only name that was associated with any game they'll
Speaker 1: name that was on the cartridge would be the company
Speaker 1: Atari's name. It didn't matter if you came up with
Speaker 1: the game idea. It didn't even matter if you coded
Speaker 1: the whole darned thing yourself. The name of the cartridge
Speaker 1: was just Atari. There was no credit to you. You
Speaker 1: weren't acknowledged at all, partly because at least the belief
Speaker 1: was that Atari didn't want to run the risk of
Speaker 1: losing talent to some other company. Like if they said, oh,
Speaker 1: this game was created by so and so, then some
Speaker 1: other company might approach so and so and say, hey,
Speaker 1: I see you like to make games. How would you
Speaker 1: like to make way more money doing it? Well, game
Speaker 1: creators weren't totally cool with this. Allot of them wanted
Speaker 1: to have more credit, or at least any credit, and
Speaker 1: Atari just wasn't keen on doing that. Plus, the folks
Speaker 1: at war Our Communications were really cost focused, and they
Speaker 1: didn't trust video game developers. They didn't think of them
Speaker 1: as creatives. So in nineteen seventy nine, a group of
Speaker 1: Atari game developers, four of them left the company to
Speaker 1: found a new one called Activision. Yeah, Activision, as in
Speaker 1: the company that's now known as part of Activision Blizzard.
Speaker 1: It all started off because a bunch of Atari game
Speaker 1: developers were fed up with how Atari was running things.
Speaker 1: They originally planned to create a company that would develop
Speaker 1: its own console, but ultimately they would develop games that
Speaker 1: would run on the Atari twenty hundred, but they would
Speaker 1: not be made by Atari. This would eventually spawn a
Speaker 1: lawsuit in which Attari tried to make Activision stop. They
Speaker 1: were claiming the Activision was infringing upon proprietary intellectual property,
Speaker 1: but eventually the two companies reached a settlement and Activision
Speaker 1: would pay a licensing fee to Atari, but otherwise would
Speaker 1: be able to continue developing games for the Atari twenty
Speaker 1: six hundred. The talent that moved from Attari to Activision
Speaker 1: represented some of the strongest developers who had been at Atari,
Speaker 1: so now Atari was forced back a step when it
Speaker 1: came to developing games. Plus, Atari's games would compete against
Speaker 1: Activision's games, and Activision would be just the first third
Speaker 1: party game developer to create a hundred cartridges. Others would follow.
Speaker 1: One of those would be a Magic, another company that
Speaker 1: had some x Atari talent, create their own developer company,
Speaker 1: and the Magic would launch in one So now Atari
Speaker 1: was going to have to compete with other companies that
Speaker 1: were making Atari games, when before Atari was the one
Speaker 1: and only source of Atari games. This will be an
Speaker 1: important component as we move forward. Now we need to
Speaker 1: talk a bit about distribution and retail because this would
Speaker 1: also play an enormous part in the collapse of the
Speaker 1: market in So let's talk about how retail typically works. Okay,
Speaker 1: So a retail outlet deals with either wholesalers or distributors,
Speaker 1: buying either from a wholesaler or directly from a distributor,
Speaker 1: or maybe directly from a source itself. But the point is,
Speaker 1: the real retail organization orders a certain number of units
Speaker 1: of whatever it is we're dealing with, in this case,
Speaker 1: video games, and that then becomes the stock that the
Speaker 1: retail establishment has to sell. Then the retail company marks
Speaker 1: up the price of this stuff and sells it on
Speaker 1: to the consumer. The retail store is the point of
Speaker 1: sale for the customer, right And of course the retail
Speaker 1: store has to mark up the price or else it
Speaker 1: would make no money. So it has to sell the
Speaker 1: thing for more money than it costs for it to
Speaker 1: purchase it to put it into its stock. That all
Speaker 1: makes sense now, Typically a retailer is on the hook
Speaker 1: for the units that they order. So if a consumer,
Speaker 1: you know, if the consumers don't buy enough of whatever
Speaker 1: it is we're talking about, then typically the retailer has
Speaker 1: to eat that cost. So if video games had worked
Speaker 1: this way in the nineteen eighties, it would have been
Speaker 1: a very different story. It would have looked something like this.
Speaker 1: Let's say, um, Jimmy Bob's video game emporium purchases twenty
Speaker 1: copies of Activision's River Rate, and let's just say, for
Speaker 1: the sake of this this example, that that costs ten
Speaker 1: dollars a pop. So each copy is ten dollars for
Speaker 1: Jimmy Bob to purchase at this this arrangement. But then
Speaker 1: Jimmy Bob marks up those copies to thirty dollars each,
Speaker 1: So Jimmy Bob spent a total of two hundred dollars
Speaker 1: buying these twenty copies of River Raiate to have in stock.
Speaker 1: That means that Jimmy Bob needs to sell at least
Speaker 1: seven copies to start making money in this drastically oversimplified example.
Speaker 1: So seven copies at thirty bucks a pop, that means
Speaker 1: he would net two. But for some reason, this here town,
Speaker 1: the Jimmy Bob's in it don't have video games with
Speaker 1: sophisticated tastes and they don't appreciate the hard work the
Speaker 1: Activision put in for River Raid. So Jimmy Bob only
Speaker 1: sells three copies, that means he brings in ninety dollars,
Speaker 1: but he spent two hundred on the games he bought
Speaker 1: straight for Activision. That means Jimmy Bob has going to
Speaker 1: bed poorer but wiser. At least you would if that's
Speaker 1: how video game distribution actually worked in the old days.
Speaker 1: It didn't. See in that case, the retailer would have
Speaker 1: to come up with other strategies, maybe trying to position
Speaker 1: games in a more inviting spot to get more people
Speaker 1: to buy them, maybe marking down the price a little
Speaker 1: bit so that they can at least break even, if
Speaker 1: not make a little bit of profit. But that's not
Speaker 1: how video game distribution worked in the early eighties. See,
Speaker 1: retailers were not super keen to carry video games that much,
Speaker 1: so companies had to make deals with these retailers in
Speaker 1: order to get their products onto store shelves, and it
Speaker 1: put a lot more of the risk on the game
Speaker 1: developers instead of the retailers. It was the cost of
Speaker 1: doing business. This was the way to convince retailers, hey,
Speaker 1: give our game systems and our cartridges shelf space in
Speaker 1: your store. Shelf space that could go to something else
Speaker 1: that you know, has a proven track record. So the
Speaker 1: deal that a lot of companies agreed to was that
Speaker 1: the video game developer would provide copies to retailers. Retailers
Speaker 1: would say, here's how many copies I think I need.
Speaker 1: The video game developer would send those copies to the retailer.
Speaker 1: The video game developer would be financially on the hook.
Speaker 1: If the retailer found it impossible to move the games,
Speaker 1: they would have to take all unsold inventory back. So
Speaker 1: now the retailers didn't carry a risk, right they would
Speaker 1: make money if they the games sold, but they would
Speaker 1: essentially get their money back if they didn't sell all
Speaker 1: the titles, because they would return the titles to the
Speaker 1: video game developer and recapture costs, and so the developer
Speaker 1: would take on the burden of games unsold. So yeah,
Speaker 1: the retailers weren't on the hook for those unsold games.
Speaker 1: This would be a key component for why the market
Speaker 1: would crash, and it put a ton of power in
Speaker 1: the hands of the retailers. And because of that, and
Speaker 1: because there was this perception that video games were the
Speaker 1: license to print money, some retailers went a bit hog wild.
Speaker 1: They drastically overestimated how many copies they would need for
Speaker 1: their titles, thinking like, everyone wants video games, so we're
Speaker 1: gonna order, you know, one copies of this thing. But
Speaker 1: then you can understand why retailers would do this too,
Speaker 1: because there was no risk, right. I mean, retailer could
Speaker 1: order a hundred copies of a game and if they
Speaker 1: only sold ten of them, well, they could still return
Speaker 1: the other ninety to the video game company and recapture
Speaker 1: those costs, so they would not be in a in
Speaker 1: a really bad position as long as everything held steady.
Speaker 1: So even really good popular games were a bit of
Speaker 1: a risk for game developers, Like if a retailer like
Speaker 1: Sears put in a really large order, you'd have to
Speaker 1: pay to manufacture that many units of car artridges and
Speaker 1: then ship them to the retailer. And then if it
Speaker 1: turned out that Sears had drastically overestimated how many units
Speaker 1: they would actually sell, you would have to take all
Speaker 1: the excess back and figure out what to do with it.
Speaker 1: So for bigger companies like Atari and to a lesser extent, Activision,
Speaker 1: this was something that they could potentially weather on a
Speaker 1: case by case basis. But for other companies it would
Speaker 1: be a different story. While we saw a ton of
Speaker 1: third party developers pop up in the Atari era, most
Speaker 1: of them wouldn't stick around for very long. The agreements
Speaker 1: with retailers would prove to be too expensive for many
Speaker 1: of those companies to navigate, and they would go bankrupt
Speaker 1: as a result. In fact, sometimes they would go bankrupt
Speaker 1: before they could take back any copies of games. We'll
Speaker 1: get to that too. But the really, really big thing
Speaker 1: that would cause the dominoes to fall happen in the
Speaker 1: winter of two. I'll explain more after we come back
Speaker 1: from this break. So in December nineteen eighty two, one
Speaker 1: or Communications holds a stockholder call. So this is when
Speaker 1: companies have to report on performance to their shareholders in
Speaker 1: order to keep them up to pace with what's going
Speaker 1: on and also to lay out projections for the following year. Well,
Speaker 1: in nineteen eighty two, video games were a huge business.
Speaker 1: We're talking a multibillion dollar industry that was dominated by Atari.
Speaker 1: And yeah, video games are a multibillion dollar industry today,
Speaker 1: but you got to remember they were very young in
Speaker 1: the nineteen eighties, right. Plus when you just for inflation,
Speaker 1: when you talk about just a few billion dollars in
Speaker 1: the early nineteen eighties, that's many, many billions of dollars today.
Speaker 1: So Atari had been pretty darn busy. In nineteen eighty two,
Speaker 1: it released the Atari fifty two hundred, which was an
Speaker 1: upgrade from the VCS Slash D so it boasted better
Speaker 1: graphics than the twenty s hundred. However, it also wasn't
Speaker 1: compatible with the games Ford, at least not initially, and
Speaker 1: it also didn't have very many games of its own
Speaker 1: to speak of, because Atari had actually directed most of
Speaker 1: its game development towards the DRED because that installed base
Speaker 1: for the console was still so large, but it meant
Speaker 1: that they didn't really have games to help sell the
Speaker 1: unred to the public. Meanwhile, Calliko had launched the Callico Vision,
Speaker 1: which ironically could pay play at twenty games on it,
Speaker 1: so if you bought a Callico Vision you could play
Speaker 1: old Atari twenty six hundred titles on it, like if
Speaker 1: you bought you couldn't. And then in Television launched the
Speaker 1: in Television two, which was pretty much just in Television
Speaker 1: one with a new case and just didn't sell anywhere
Speaker 1: close to as many units as the twenty hundred had
Speaker 1: And here's where we get to some of the big
Speaker 1: issues that Warner Communications was going to have to address.
Speaker 1: One is that by two the Atari undred was really
Speaker 1: showing its age. The Colliko vision was more technically advanced.
Speaker 1: And of course, Attari itself had initially planned to phase
Speaker 1: out the twenty six hundred in nineteen eighty, but then
Speaker 1: changed course once the console sales started to pick up,
Speaker 1: but the market was pretty well saturated. Most of the
Speaker 1: folks who wanted an atarid already owned one, didn't grab
Speaker 1: hold in the market the same way, and so that
Speaker 1: was a disappointment to Atari. Meanwhile, Atari was also seeing
Speaker 1: these other developers out there, these third party developers putting
Speaker 1: out games that were competing with Atari's own titles. So
Speaker 1: while Atari would make licensing fees from these other third
Speaker 1: party developers, it wasn't profiting off of big sales. So
Speaker 1: if Act Division were to put out a real banger,
Speaker 1: and they put out a lot of bangers, ATRII wouldn't
Speaker 1: see any of those profits. It would get the licensing fee,
Speaker 1: but you know, if River Raids sold millions of copies,
Speaker 1: none of that money was really going to Atari. So
Speaker 1: while video games in general were doing well. Atari, the
Speaker 1: company wasn't performing quite where it wanted to be, and
Speaker 1: because Atari dominated the market, this meant that the industry
Speaker 1: as a whole was on shaky ground, like it was
Speaker 1: all kind of dependent upon Attari to some extent, like
Speaker 1: Activision as a company could be doing great, but if
Speaker 1: Atari were to suffer, while Activision would as well, because
Speaker 1: you've got to be able to play the games on something, right.
Speaker 1: So in this shareholder meeting, one or Communications reps revealed
Speaker 1: that they had determined the profit increase for Atari would
Speaker 1: be around ten to fift percent. That's great, right, You're
Speaker 1: seeing a profit increase. Well, the problem was that Wall
Speaker 1: Street analysts had predicted that this would be closer to
Speaker 1: a fifty percent increase in profits, So being adjusted down
Speaker 1: to ten to fifteen percent was a big drop. The
Speaker 1: video game market seemed like it was a gold mine.
Speaker 1: But you know too, investors, this seemed like it was
Speaker 1: an indication that the industry had already peaked and was
Speaker 1: now petering out. Like they were seeing this as a warning.
Speaker 1: So a lot of people, discouraged by this news decided
Speaker 1: to dump their stock in Warner Communications. That depreciated the
Speaker 1: value of Warner's stock, and Warner's Communications saw its stock
Speaker 1: dropped from fifty one dollar a share to thirty five
Speaker 1: dollars a share. The company lost hundreds of millions of
Speaker 1: dollars in value overnight. Now, at this point, Atari contributed
Speaker 1: more to Warner Communications revenue than the film division did.
Speaker 1: In fact, according to some sources, Atari was generating five
Speaker 1: times the amount of revenue then Warner Brothers movies were
Speaker 1: at that point. Now, obviously this had a huge impact
Speaker 1: on Atari, and because Atari was almost synonymous with the
Speaker 1: home video game market, it also had a huge impact
Speaker 1: everywhere else as well. But this was still just one
Speaker 1: really big factor in the crash. Now, I should add
Speaker 1: there were other ones that also played a part, and
Speaker 1: one was that Atari was spending a lot of money
Speaker 1: getting licenses for really popular I p like pac Man,
Speaker 1: and Atari made a pretty mediocre home version of pac Man.
Speaker 1: It was in some ways technically impressive because Atari was
Speaker 1: only powerful enough to show two sprites at a time. Well,
Speaker 1: pac Man is your character of pac Man plus four ghosts,
Speaker 1: So how do you make sure that you can show
Speaker 1: you know, five sprites at one time. The solution was
Speaker 1: to make the ghosts flash. They were doing so at
Speaker 1: a very very fast rate, so they looked kind of
Speaker 1: of spectral, but they were flashing so that technically each
Speaker 1: of the four ghosts was only appearing for like a
Speaker 1: quarter of a second, and then collectively, you you know,
Speaker 1: through the persist and sub vision, it looked like they
Speaker 1: were just there. Emulators make this problem way worse. So
Speaker 1: if you ever see an emulator version of the pac
Speaker 1: Man game, the ghosts are flashing on and off in
Speaker 1: a very dramatic way. That wasn't the case with the
Speaker 1: actual game when it first came out. Still it's not great. However,
Speaker 1: it sold really well. You remember when I said Space
Speaker 1: Invaders was Atari's second most popular cartridge. Guess what number
Speaker 1: one was. Yep, it was pac Man. The game was
Speaker 1: not a flop, it was a success. No other Atari
Speaker 1: cartridge for the Atari sold more copies than pac Man. However,
Speaker 1: retailers ordered more copies than they sold. So retailers ordered
Speaker 1: way more copies of pac Man because it was such
Speaker 1: a huge hit of the arcade. You know, Pacman was
Speaker 1: the arcade game of the early nine It spawned a
Speaker 1: crazy amount of merchandise. There was a cartoon series like
Speaker 1: it was in popular culture. It was beyond just an
Speaker 1: arcade game. This was something that was seen as like
Speaker 1: a lifestyle thing. So retailers were sure that the copies
Speaker 1: were just gonna sell out all over the place. They
Speaker 1: ended up ordering way more than they needed. This meant
Speaker 1: that Attori had to take back the unsold stock. And
Speaker 1: the same is true for another title that is frequently
Speaker 1: mentioned whenever you talk about the video game crash, the
Speaker 1: infamous E T. The Extraterrestrial. It's frequently mentioned in conversations
Speaker 1: about the as you know, the worst game of all time.
Speaker 1: It's it's often in that mix. In fact, Tex Stuff
Speaker 1: famously once called it that too, largely because of public perception. Um,
Speaker 1: here's the thing. It's not a very good game, but
Speaker 1: it's definitely not the worst game of all time. I mean,
Speaker 1: for one thing, there are games that have shopped that
Speaker 1: people bought that are literally unplayable, that they are so
Speaker 1: broken you cannot play them. E T. Was not that
Speaker 1: ET was playable, It's just it was also a little confusing,
Speaker 1: so it was kind of hard to figure out what
Speaker 1: you were supposed to do. It also wasn't very much
Speaker 1: fun even when you knew what you were supposed to do.
Speaker 1: But it did work now I owned a copy of it.
Speaker 1: In fact, well, ET also didn't sell as many units
Speaker 1: as Atari produced. It sold like a million and a
Speaker 1: half units, but Atari made more than that. And also
Speaker 1: the licensing fee the Atari paid in order to be
Speaker 1: able to make ET in the first place was pretty
Speaker 1: darn steep, so that was a big expense. So Atari
Speaker 1: spent a lot of money making E t and then
Speaker 1: had to spend more money to take back unsold stock.
Speaker 1: And famously Atari would toss thousands of cartridges into a landfill,
Speaker 1: which would become the subject of a documentary film many
Speaker 1: decades later. So Pacman and ET cost Atari money. Definitely,
Speaker 1: they really they took you know, you took a hit
Speaker 1: on both of those. However, ET and Pacman did not
Speaker 1: spontaneously cause the entire video game industry to crumble. There
Speaker 1: was no shortage of lousy games out there for the
Speaker 1: A and I'm sure that was part of the reason
Speaker 1: that folks weren't eager to buy more consoles. But that's
Speaker 1: just one piece of the puzzle as well. I have
Speaker 1: a little bit more I want to say about this,
Speaker 1: but before I get to that, let's take one last break. Okay,
Speaker 1: so we've established that pac Man and et. While certainly
Speaker 1: you know, a black mark on Atari's reputation and a
Speaker 1: hit to their revenue, we're not responsible for the entire
Speaker 1: industry crashing in. On a similar note, we can also
Speaker 1: mention home computers. People frequently cite home computers as being
Speaker 1: the reason why video game consoles died. That is being
Speaker 1: a little too simplistic as well. The home PC market
Speaker 1: had started in the late nineteen seventies. Like the Apple,
Speaker 1: the original Apple computer was really just for hobbyists. The
Speaker 1: Apple two was the first one aimed at beyond just
Speaker 1: the hobbyist market, but it was fairly modest. Early on.
Speaker 1: Some folks point to computers as being the reason that
Speaker 1: consoles were dying because parents were switching to computers because
Speaker 1: the computer could do way more stuff than just play games.
Speaker 1: They could potentially help a kid do homework and stuff,
Speaker 1: so they were looked at as being, you know, useful
Speaker 1: and not just a diversion. And I'm sure there's an
Speaker 1: element of truth to that for at least some households,
Speaker 1: But computers were typically much more expensive than home video
Speaker 1: game consoles, and even by the mid nineteen eighties they
Speaker 1: were still kind of a niche market, Like, yeah, you
Speaker 1: could buy a computer instead of a home video game
Speaker 1: console system, but you'd be spending five hundred to seven
Speaker 1: dollars more in nineteen eighties dollars. That's a significant expense.
Speaker 1: So I think they contributed to the problem that video
Speaker 1: game consoles were going through, but they were not the
Speaker 1: smoking gun. It was not that as a whole, Americans
Speaker 1: decided that video game consoles were off and now computers
Speaker 1: were the thing. I do think that the lousy games
Speaker 1: had a little bit more of an impact than computer consoles.
Speaker 1: I mean, I was a kid in the early eighties.
Speaker 1: I asked my parents to buy a game for me,
Speaker 1: like I said, this was what I wanted for my
Speaker 1: birthday or for Christmas or something. And then I get
Speaker 1: the game and it's just playing awful. Well, that's likely
Speaker 1: to discourage my parents from buying me another game in
Speaker 1: the future, right, Like, If I'm like, this is terrible
Speaker 1: and I don't even want to play it and it
Speaker 1: costs thirty bucks, probably not going to get another one
Speaker 1: anytime soon. Now, there were some awesome games out there,
Speaker 1: don't get me wrong, some truly amazing games. For the
Speaker 1: Atari twenty six hundred when you take into account what
Speaker 1: the twenty six hundred was capable of. I'm not gonna
Speaker 1: say they would stand up toe to toe with Call
Speaker 1: of Duty or something, but sometimes you would just end
Speaker 1: up with rotten games because maybe you thought the name
Speaker 1: of the game sounded cool, or the cover art on
Speaker 1: the box was interesting. Because I remember, there was no
Speaker 1: Worldwide Web back in those days, so you were probably
Speaker 1: just buying something based upon how it looked in the store.
Speaker 1: Maybe if you were living in certain markets, you might
Speaker 1: have access to things like a trade magazine that was
Speaker 1: covering stuff like home video games. I grew up in
Speaker 1: rural Georgia. I was lucky to see magazines at all,
Speaker 1: so so that was not the case for me. Anyway.
Speaker 1: Atari went into a bit of a spiral, not just
Speaker 1: because of the recession brought on by this uh this,
Speaker 1: this change in investor expectations, but also due to just
Speaker 1: mismanagement within the company itself. Atari also had a true
Speaker 1: successor to the twenty six hundred planned This was the
Speaker 1: seventy eight hundred. This would have been the truly more
Speaker 1: powerful console. It technically would have been a third generation
Speaker 1: video game console. It would have been closer to being
Speaker 1: on par with the Nintendo Entertainment system that wouldn't come
Speaker 1: out in the U S till But before Atari could
Speaker 1: go into full production on the seventy eight hundred, Warner
Speaker 1: Communications sold off the Atari home video game division to
Speaker 1: Jack Trammel, who had previously founded Commodore and had subsequently
Speaker 1: entered into a bitter feud with Commodore. Now, I've covered
Speaker 1: the story of Atari elsewhere. I've also covered the story
Speaker 1: of Commodore elsewhere, so I'm not going to go into
Speaker 1: all of that except to say that the seventy eight
Speaker 1: hundred was a casualty as a result of Atari changing
Speaker 1: hands from Warner Communications to Jack Trammel. But the recession
Speaker 1: reached beyond Atari itself. Kaliko decided to develop a home
Speaker 1: computer expansion for the Clico Vision. This one was called Adam,
Speaker 1: and they were attempting to get into the home computer
Speaker 1: market while keeping a toe in the video game industry.
Speaker 1: But Adam turned into a flop, really expensive flop, and
Speaker 1: then Calico got out of the business entirely. Mattel, after
Speaker 1: the failure of the in television, to decide to extricate
Speaker 1: itself from the home video game market as well eventually
Speaker 1: sold those assets off to other companies, and meanwhile, video
Speaker 1: game developers were going out a business left and right.
Speaker 1: A lot of companies that made super cheap games were
Speaker 1: gone first because they were a victim of that retail
Speaker 1: arrangement I mentioned earlier. The Magic had to change its plans.
Speaker 1: It had been heading for an initial public offering or
Speaker 1: i p O. That's when a company goes from being
Speaker 1: a private company to a publicly traded company on the
Speaker 1: on a stock market. But after the Warner Communications stock
Speaker 1: took a dive, a Magic put those plans on hold,
Speaker 1: and eventually the company folded, largely also because of that
Speaker 1: retail issue. While that shareholder call could be pointed to
Speaker 1: as the inciting incident for the video game crash, it
Speaker 1: wasn't as if the market collapsed entirely overnight. It actually
Speaker 1: was drawn out over a couple of years. But the
Speaker 1: writing was on the wall. Retailers became skeptical of video
Speaker 1: games in general. After many of the questionable developers went
Speaker 1: out of business. It meant that a lot of retail
Speaker 1: companies were left holding onto stock that they couldn't send
Speaker 1: back because there was no back right. The companies that
Speaker 1: had made those games didn't exist anymore. So that's when
Speaker 1: you started seeing retailers create these enormous bargain bins where
Speaker 1: they were selling cartridges at like a dollar each or something.
Speaker 1: And these were a lot of these were like just
Speaker 1: the worst games, the lowest quality stuff, because again, the
Speaker 1: companies that had made them no longer existed. Uh not
Speaker 1: not a great ad for you to go out by them.
Speaker 1: And meanwhile the retailers are just trying to get rid
Speaker 1: of them, to get them out of the stores. Uh.
Speaker 1: This was this, This created just like a bad feeling
Speaker 1: for everybody, the consumers and the retailers. And I would
Speaker 1: say that the video game crash really happened for a
Speaker 1: lot of these reasons. A big one was that retailer agreement,
Speaker 1: the fact that retailers fell into the same traps that
Speaker 1: investors did. They overestimated the profit that they would make
Speaker 1: coming from these games, so overestimating the market was a
Speaker 1: big part of it. And that the retailers, as a
Speaker 1: result of getting burned by this, were less interested in
Speaker 1: carrying and promoting home video game consoles. And meanwhile the
Speaker 1: consumers were thinking, well, really, the problem here is that
Speaker 1: I want something that looks a little better. The arcades
Speaker 1: had been getting better and better. The arcade games have
Speaker 1: been getting better and better. The arcades themselves would have
Speaker 1: their own massive recession, but the home market wasn't getting
Speaker 1: better because you were still using the same old console hardware.
Speaker 1: If Atari had introduced the hundred a year or two
Speaker 1: earlier than it did, then things probably would have been
Speaker 1: a lot different, or at least they potentially could have
Speaker 1: been a lot different. Instead, it took Nintendo coming over
Speaker 1: and introducing the Nintendo Entertainment System to revitalize the video
Speaker 1: game market here in the United States. Uh And famously,
Speaker 1: when Nintendo did that, they would pair the NES with
Speaker 1: a robot in order to try and sell it as
Speaker 1: a toy in toy stores because toy stores were not
Speaker 1: super eager to hold video game consoles because of the
Speaker 1: issues I just said, a lot of the problems that
Speaker 1: led to this crash were kind of self fulfilling. It
Speaker 1: was this vicious cycle of of issues that collectively created
Speaker 1: this market collapse. So, yeah, it's a little too simplistic
Speaker 1: to say et killed video games in America. That's not accurate.
Speaker 1: It was one aspect of lots of different things that
Speaker 1: collectively lead to the dissolution of video games for a
Speaker 1: good two years in the United States. In other parts
Speaker 1: of the world, by the way, this was not the
Speaker 1: case like in Europe and Japan, the video game industry
Speaker 1: didn't have this massive recession the way it did here
Speaker 1: in the States. But yeah, that is a story about
Speaker 1: the three video game crash. Hope you enjoyed it. If
Speaker 1: you have suggestions for topics that I should cover in
Speaker 1: future episodes of tech Stuff, please reach out to me
Speaker 1: and let me know. The best way to do that
Speaker 1: is on Twitter. The handle for the show is text
Speaker 1: Stuff H s W and I'll talk to you again
Speaker 1: really soon. I gotta go over to Jimmy Bob's video
Speaker 1: game Emporium first return this broken copy of Pitfall. Text
Speaker 1: Stuff is an I Heart Radio production. For more podcasts
Speaker 1: from I Heart Radio, visit the i Heart Radio app,
Speaker 1: Apple Podcasts, or wherever you listen to your favorite shows.