Player 3 Stage 6: The Great Videogame Crash
By 1983, commercial videogames have been around for 12 years, and while this may seem like a pretty long span, it's an incredibly short time for an industry to go from non-existence to total domination of the entertainment sector. But if you think the rise was quick, its complete destruction only takes about 6 months.
Game Over
In 1983, sales in videogames across the board have risen from 950 million dollars the previous year to $3.2 billion. Atari itself accounts for $900 million of that total. 25% of US homes have at least one system. There have been 12 million 2600's sold by Atari, a company that employs almost 10,000 people in a huge sprawling system of buildings around Silicon Valley. There are over 200 games available their system, with new batches hitting the market every week. There are a million Intellivisions sold by Mattel, with another million and a half ColecoVision sales for Coleco. By the end of the year, it was unraveling. In early 1984, it all comes to a crashing halt, with every major videogame system up to that point either being sold to independents or discontinued altogether. A public that had once seemed to possess an insatiable appetite for any new game or console to come down the pike now collectively turns their backs on the game makers. An industry that had practically sprung up overnight to dominate the entertainment sector crashes just as quickly.
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Pac-Mess
Atari, comprising 2/3 of the industry, bears the brunt of the shakeout. The first sign of trouble comes with the 2600 version of Pac-Man, released in 1981. It is designed by Tod Frye, who's previous claim to fame is being the programmer of the Atari 800 port of Asteroids. Thanks to the words "Pac-Man" on the box, along with a $15 million advertising blitz, the game goes on to become the biggest selling Atari cartridge ever. It's apropos that the launch day for VCS Pac-Man is April the 1st, as only a fool wouldn't notice that the quality of the game is awful, bearing only a very passing resemblance to the coin-op. The graphics in the VCS port are horribly blocky, with the title-character a malformed circle with a bad case of lockjaw; his mouth opens and closes at a painfully slow rate, with the movement more like a mashing than a gobbling. The ghosts are a vision of massive flicker, almost invisible as they move around the maze, their eyes rotating meaninglessly. The fruit prizes are represented by a two-tone coloured block that never changes shape. The only redeeming aspect of the game would be plenty of different game variations, but there are only eight, simply changing the speed at which the Pac-Man and the the ghosts move. As for sound, there is the grating three-note starting sound, the incessant clang-clang-clang as the Pac gums the rectangle "dots" to death, and the flat-as-a-pancake death sound. It is painfully apparent that the game is a rush job to make the 1981 Christmas season, in order to quickly recoup the money paid by Atari to Namco for the Pac-Man license. Frye is ensconced in a room by himself 
to code for the four month deadline, and his end product results in a million dollar paycheque, which he cockily staples to his office door. Better versions are eventually released for other platforms like Atari's own 400/800 computers and the 7200 ProSystem, as well as other manufacturers' game platforms like the Commodore 64. Atari is eventually redeemed with the vastly improved Ms. Pac-Man 2600 version released in 1983. But the original cartridge is an undeniable creative stumble by Atari, and no other game demonstrates how overwhelmed the 2600 is graphically by emerging systems than the 1981 release of 2600 Pac-Man. Accompanying the game's release is a massive backlash from critics and users alike, users who have had a cold splash of reality thrown into their face about just how obsolete the VCS has now become.
Of course, not every game released this year is a turkey, as shown by the marvelous Yars' Revenge, originally conceived as a port of Cinematronics' hit vector arcade game Star Castle until the licensing deal falls through. The designer is Howard Scott Warshaw, creator of some of the more complicated 2600 games, including Raiders of the Lost Ark and The A-
Team, which starts out as a game called Saboteur until the graphics are altered and the name of the hit early 80's Mr. T vehicle is 
slapped on the cartridge. He juggles the play mechanics of the now-licenseless Star Castle port around a bit, and the result is one of the most original and involving games in the 2600 library. The title character's name is taken from Atari president Ray Kassar, to show his triumph over the failed license deal.
Extra-Terrible
Their next big fumble is E.T.: The Extra-Terrestrial. Warner chairman Steve Ross negotiates a 21 million dollar deal with Steven Speilberg and Amblin Entertainment to license E.T. for the arcade and home markets, and Atari expects their games to match the success of the movie, at the time the highest-grossing ever made. Following his success with Yar's Revenge, Howard Scott Warshaw accepts the breakneck five-week deadline to get a game out for the 2600 for Christmas 1982. The resulting game nets Warshaw a $200,000 payment, but is torture for gamers, featuring frustrating control over the lost alien, along with endlessly confusing gameplay. Expecting a windfall of sales, Atari manufactures a huge amount of carts, reportedly making more than there are 2600 machines to play them. Five million are released to stores, only one million eventually sell. Atari is left with a massive inventory of unsold cartridges as the game becomes one of the greatest videogame flops in history. With the market crashing down around Atari's ears, under cover of night sometime in 1983 a convoy of 14 tractor-trailer trucks are loaded with millions of unsold Pac-Man, E.T., and other surplus cartridges, along with various hardware prototypes and limited production runs littering Atari's warehouses. 
The trucks are driven to a secret landfill site in Alamogordo, New Mexico, home 
of another big bomb; nearby was the site of the 1945 Trinity test, the first explosion of a nuclear device. The cartridges are ground up and then buried in huge cement sarcophagi. Atari later insists the midnight burial was done to dispose of "defective" inventory. If only they could bury the lack of confidence the abject failure of the E.T. videogame fosters in shareholders and consumers alike as easily. They're not the only culprit, however, as both Mattel and Coleco overproduce cartridges in a market becoming less and less able to support them.
A Raging River of Garbage
Even though successful third-party game makers Activision and Imagic are producing some of the better games for the 2600 in its later years, Atari feels their grip sliding on the control of the software library for their system, and they get involved in a legal tussle with the two companies. Atari eventually loses this case in court, opening the floodgates for third-party manufacturers of games for their systems. Soon everybody and their dog has a game out, and while this does expand the machine's library of cartridges, little concern is given for their quality. There are 50 companies publishing games for the 2600 in 1982, companies such as 20th Century Fox, Avalon Hill, CommaVid, Froggo, Milton Bradley,, Quaker Oats, Sega, Spectravision, Tigervision, Wizard Video Games and Xonox. Parker Bros., known more for being the makers of board games like Monopoly, wade in with the largest bid yet for an arcade game license, paying Nintendo $2 million for Popeye, plus a promise of $4 for every cartridge they sell. Products such as Purina dog food, Coca-Cola and Kool-Aid are being hawked by shoddy game tie-ins. Slipping a bit in its policy of always being on the vanguard of every new media technology, the porn industry enters the fray with games like Mystique's Custer's Revenge, featuring a perpetually aroused General Custer trying to rape an Indian maiden tied to a stake. Atari spokespeople frantically attempt to distance the company from such games, although this doesn't prevent organizations such as Women Organized Against Rape from picketing Atari headquarters. With game inventory surplus piling up into the millions, cartridges are dumped onto the shelves at a fraction of previous prices, at some retail stores for as low as a dollar a cart, and Atari finds their main source of income drastically reduced. Rivals such as Mattel and Coleco both have to slash the prices of their systems and 
games in order to compete with the ever-increasing videogame glut.
Same Old Same Old
Combined with this over saturation is growing consumer indifference fostered by the lack of substantial improvements in product lines. Atari, the de facto market leader in video games, has left behind its daring, engineering past with founder Nolan Bushnell's departure in 1978. It has instead adopted a marketing focus favoured by the suits like Ray Kassar, content to sell what they have as opposed to continued innovation. Atari lets nine years pass before introducing the first real technological update to their system line-up with the 7800, and they fill the gap in between with redesigns of the venerable 2600, which admittedly does have a larger game base than all of the other major systems combined. This culminates in the 2600jr., a super-compact redesign that sells for a paltry $50. 
The lackluster 5200 fails to set the market on fire. Mattel themselves are unable to come up with a suitable replacement for the Intellivision, opting instead to release the Intellivision II, offering no new technology over the old Master Component. With rebates, the "new" system's price is also drastically reduced, retailing for $50 on average. With the prices of their consoles and games slashed, the big three have trouble financing their attempts at snagging a piece of the home computer market, and their various computer projects drain already dwindling profits.
The Home Computer Bytes
The third member of the deadly troika that lays the videogame industry low is the home computer boom currently in full swing by 1984, fueled by incredibly low prices and a growing library of engaging new computer games. The Apple II is well-established as a gaming platform in the early 80's, but Commodore head Jack Tramiel's kept promise of a line of under $300 computers creates an explosion of sales as people wonder why they should spend that much on the latest videogame when they can have a functional computer for the same price. The Commodore VIC-20 is the first colour computer to break the $300 price barrier, and at its prime hits 9000 units produced daily. Its successor, the 64, enjoys unmatched success with 22 million units sold. By 1984, Commodore is selling 300,000 computers a month, and there are 4 million Commodore computers in use around the world. Many people, including me, sell their current videogame system (in my case, the ColecoVision) and move to a computer, never to look back at consoles again. Time magazine heralds the arrival of the computer as a popular consumer device by changing their annual "Man of the Year" award to "Machine of the Year" and giving it to The Computer, in a cover story dated Jan. 3, 1983.
Game Over
All this combines to deal a death-blow to the videogame industry. With cartridge sales slacking, Atari owners Warner Communications surprises market analysts by reporting a slump in their fourth-quarter earnings in 1982. Profits for the company have shrunk 56% after an 8-year run of growth, which results in their stock price plummeting from $54 to $35, costing the company $1.3 billion in market valuation. Soon comes the inevitable rounds of bloodletting, with 1,700 Atari employees getting the axe in a first round of layoffs, in the early part of 1983. Even with the loss of this overhead, development costs of new gaming and computer hardware are mounting and Atari's market share in the video game industry is down to 40%, half of what it was in their heyday. The company loses $532.6 million in fiscal year 1983, bleeding out $2 million daily. Eventually, the home console and computer divisions of Atari are dumped into recently ex-Commodore head Jack Tramiel's lap during the summer of 1984 for $240 million in long term notes, 
a sum greatly under Atari's peak value, while retaining the arcade division. The new Tramiel-led 
Atari Corp. limps through the turmoil under the power of its 16-bit home computer line, but the payroll is cut to 400 people and practically all (save one special exception) videogame projects are scrapped. In 1996, Tramiel merges Atari Corp. with hard-drive manufacturer JTS Corporation, who are looking to obtain Atari's American Stock Exchange listing and become a publicly traded company. In early 1998 JTS sell what's left of the Atari division to giant toy company Hasbro for US$ 5 million in cash. Atari's contribution to the home game scene lives on under the Hasbro umbrella, and the mother company wastes no time in exploiting the deep well of ground-breaking Atari classic titles, including a drastic 1999 remake of the game that started the whole industry, called Pong: The Next Level.
1982 sees Mattel stock shedding 40% of its value when it reports losses of 195 million dollars, with the company eventually losing a total of $361 million due to their electronics division. After discontinuing the Intellivision early in 1984 Mattel eventually sells their electronics division for the paltry sum of $20 million. Coleco themselves are in hot water with a loss of $258.6 million in 1984, mainly due to the tremendous flop made by their ADAM computer line. The Adam and ColecoVision lines are dropped in 1985, and Coleco itself succumbs to Chapter 11 in 1988. After the market crash of 83-84, the corporate love-affair with videogames vanishes, and no North American company will touch the things with a ten metre joystick. In Kyoto, Japan, however, a little 100 year-old former playing card company has plans to hit the reset button.
Multimedia:
Images
Video
Pac-Man for VCS - Atari 1981E.T. The Extra-Terrestrial - Atari 1982
Donkey Kong for Intellivision - Coleco 1982
Chase the Chuckwagon - Spectravision 1983
