Video game crash of 1977:
In 1977, manufacturers of older, obsolete consoles and Pong clones sold their systems at a loss to clear stock, creating a glut in the market,[17] and causing Fairchild and RCA to abandon their game consoles. Only Atari and Magnavox remained in the home console market, despite suffering losses in 1977 and 1978.[18]
The crash was largely caused by the significant number of Pong clones that flooded both the arcade and home markets. The crash eventually came to an end with the success of Taito's Space Invaders, released in 1978, sparking a renaissance for the video game industry and paving the way for the golden age of video arcade games.[17] Soon after, Space Invaders was licensed for the Atari VCS (later known as Atari 2600), becoming the first "killer app" and quadrupling the console's sales.[19] This helped Atari recover from their earlier losses.[18] The success of the Atari 2600 in turn revived the home video game market, up until the North American video game crash of 1983.[20]
North American video game crash of 1983:
Causes and factors
The American video game console crash of 1983 was caused by a combination of factors. Although some were more important than others, all played a role in saturating, and then imploding, the video game industry.
[edit] Plethora of games and consoles
At the time of the U.S crash, there were numerous consoles on the market, including the Atari 2600, the Atari 5200, the Bally Astrocade, the ColecoVision, the Coleco Gemini (a 2600 clone), the Emerson Arcadia 2001, the Fairchild Channel F System II, the Magnavox Odyssey2, the Mattel Intellivision (and its just-released update with several peripherals, the Intellivision II), the Sears Tele-Games systems (which included both 2600 and Intellivision clones), the TandyvisioN (an Intellivision clone for Radio Shack), and the Vectrex.
Each one of these consoles had its own library of games, and many had large third-party libraries. Likewise, many of these same companies announced yet another generation of consoles for 1984, such as the Odyssey3, and Atari 7800.[2]
Adding to the industry's woes was a glut of poor titles from hastily financed startup companies. These games, combined with weak high-profile Atari 2600 games, such as the video game version of the hit movie E.T. the Extra-Terrestrial and an infamous port of the popular arcade game Pac-Man, seriously damaged the reputation of the industry. Finally, Atari's market-leading 2600, then in its sixth year, was starting to approach saturation.
[edit] Competition from home computers
Until the late 1970s, microcomputers had primarily been sold in specialty computer stores at a cost of more than $1,000 USD ($3400 in 2010 dollars). However, by the early 1980s, many companies released a new class of computer, the home computer that could connect to a TV set and offered color graphics and improved sound. The first of these systems were the Atari 400 and 800, but many competing models vied for consumer attention. By 1982, the TI 99/4A and the Atari 400 were both at $349 ($800 in 2009 dollars), Radio Shack's Color Computer sold at $379 ($800 in 2009 dollars), and Commodore had just reduced the price of the Commodore VIC-20 and the Commodore 64 to $199 ($400 in 2009 dollars).[3][4][5]
Because these and other home computers generally had more memory available, and better graphic and sound capabilities than a console, they permitted more sophisticated games and could also be used for tasks such as word processing and home accounting. Also, their games were often much easier to copy, since they came on floppy disks or cassette tapes instead of ROM modules (though many of them continued to use ROM modules extensively). The use of a writable storage medium also allowed players to save games in progress, a feature useful for the increased complexity of computer games, and one not available on the consoles of the era.
In a strategy that directly affected its home computer arch-rival Atari,[citation needed] Commodore explicitly targeted video game players in its advertising by offering trade-ins toward the purchase of a Commodore 64 and suggesting that college-bound children would need to own computers, not video games.
[edit] Loss of publishing control
Activision was founded by Atari programmers who left the company in 1979 because Atari did not allow credits to appear on the games and did not pay employees a royalty based on sales. At the time, Atari was owned by Warner Communications, and the developers felt that they should receive the same recognition that musicians, directors, and actors got from Warner's other divisions. After Activision went into business, Atari quickly sued to block sales of Activision's products, but never won a restraining order and ultimately lost the case in 1982.[6] This court case legitimized third-party development, encouraging companies such as Quaker Oats (with their US Games division) to rush to open video-game divisions, hoping to impress both stockholders and consumers. Companies lured away each other's programmers or used reverse engineering to learn how to make games for proprietary systems. Atari even hired several programmers from Mattel's Intellivision development studio, prompting a lawsuit by Mattel against Atari that included charges of industrial espionage.
Despite the lessons learned by Atari in the loss of its programmers to Activision, Mattel continued to try to avoid crediting game designers. Rather than reveal the names of Intellivision game designers, Mattel instead required that a 1981 TV Guide interview with them change their names to protect their collective identities. ColecoVision designers worked in similar obscurity, feeding more departures to upstart competitors.
Unlike Nintendo, Sega, Sony, or Microsoft in later decades, the hardware manufacturers in this era lost exclusive control of their platforms' supply of games. With it, they also lost the ability to make sure that the toy stores were never overloaded with products. Activision, Atari and Mattel all had experienced programmers, but many of the new companies — rushing to join the market — did not have enough experience and talent to create the games. Titles such as Chase the Chuck Wagon (about dogs eating food, bankrolled by the dog food company Purina), Skeet Shoot, and Lost Luggage were examples of games that companies made in the hopes of taking advantage of the video-game boom. While heavily advertised and marketed, these games were perceived to be of poor quality and did not catch on as hoped, further damaging the industry.
[edit] High-profile disasters
A core cause of the crash was two high-profile titles for the Atari 2600 that were disasters. In 1981, Atari attempted to take advantage of the craze following the arcade game Pac-Man by releasing a version for the Atari 2600. However, development was rushed so as to have the game out in time for the 1981 Christmas season. Although the game managed to sell well in terms of absolute numbers, Atari had grossly overestimated the number of sales it would generate. Critics and gamers universally panned the game as being nothing like the lively, colorful original. In the end, Atari only sold a little over half the number of cartridges it produced. Production cost overruns combined with the costs incurred with a big marketing campaign for the game resulted in huge losses for Atari.[7]
The following year, Atari issued its widely advertised E.T. game. Once again, it manufactured millions of units in anticipation of a major hit. Concerned about making the holiday season, Atari again rushed the game to market quickly, after a mere six weeks of development time. The end result was a disaster and it is widely considered to be one of the worst video games ever. To clear their inventory, Atari eventually ended up burying the unsold copies in a landfill in New Mexico. Combined with the high costs for the movie license, ET became another financial disaster for Atari. Atari was sold two years later as the crash impacted upon the industry.
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