The Rise and Fall of the Atari Empire

Please note that I wrote this back in October 2007.

History is a funny thing. It never ends, it’s never predictable, and sometimes, the course of history can be traced to singular events in the timeline of the grand scheme of things. The ebb and flow of history just as strange, because it can change before it’s written, before it’s etched into the annals of manuscripts that scribe them down.

Video games, like all entertainment mediums, have their own history, and it has its ups and downs throughout their thirty years of existence. Looking back into the golden era of video games, which are considered two periods; the arcade revolution in the late seventies and late eighties, and the console boom after the infamous crash of 1984, one of the questions that I always ask myself is, what would happen if it turned out differently? What would video games be like if say, Nintendo never came to the United States? What if Atari ruled the virtual world? Why did Atari lose out in the end over the Japanese powerhouse known as the Famicom?

The Atari 2600 began in the late 1970’s as a push project to bring video games out of the arcades and into the home. Nolan Bushnell, the founder of Atari back in 1972, was trying to find the next big step in video entertainment after the mainstream success of Bushnell’s Pong. He spring boarded this by trying to gather extra funding for the system, and Nushnell’s big break came when the Time Warner Company purchased Atari for roughly $28 million, which brought enough revenue for the launch of the Atari 2600, known at the time as the Video Computer System (VCS), in 1977.

It is interesting to note that Nolan Bushnell would be eventually forced out of the company in 1978, and was replaced by Ray Kassar, who would be the head of the Atari company until 1984, ironically before the great crash that occurs that year. Kassar, who was a more strict and organized leader than Bushnell who was notorious for his laid back approach on leading, also shifted the focus of Atari’s funds from game development to marketing and sales.

Kassar’s decision to focus more on marketing may be a part of the reason for why the system was such a runaway success. Between 1977-1981, the Atari 2600 led all sales in the currently growing market of video games. This included systems like the Magnavox Odyssey2, Colecovision, the Mattel Intellivision, and the Vectrex system. Owning nearly 60% of the market share, and half of Time Warner’s income.

Kassar’s market focus was obviously not the only factor. The Atari 2600 had a slew of best selling games, mostly ports from the arcades. These included Space Invaders, Breakout, Donkey Kong and Pac-Man, which would become the biggest seller on the system. As well as that, great Atari exclusives, such as Adventure, Yar’s Revenge, and Pitfall made the system a popular success.

The technical aspects of the machine were cutting edge at the time, if not complex and difficult to develop games properly. The CPU was capable of 128 MB of RAM, using the MOS Technology 6507. The memory, which was a cut down version of current chip technology at the time, was expensive to produce. However, with this, the Atari 2600 was capable of a larger, 128 color palette that enhanced the graphics if used properly. To create a graphic on the screens, programmers had to scan and match the colors on the palette for each space the palette was needed. A touch sensitive joystick, a 12-button keyboard, a plastic paddle, and a driving controller made the Atari 2600 a diverse machine in terms of play control.

But what would lead to the machines demise? A lot of factors can be cited, but certain events definitely put the Atari 2600 onto the path of destruction. One of the most notorious problems with Atari, and the industry at the time, was that Kassar never let game developers receive credit for their creations. This angered numerous game makers, who felt they were shafted by not only a royalty standpoint, but also for recognition of their art. The most famous example is Activations own rebellion against Atari. Game developers began leaving Atari one by one, and formed the company in 1980, and sold their games out to not only Atari, but to eventually the Commodore 64 and the Colecovision. Successful games, such as Pitfall and River Raid, were released soon after on Atari, putting Activision on the map as one of the first third party publishers in video games. Kassar was enraged, and even sued Activision for insider trade secrets and stealing products from Atari. He even reduced himself to call the developers “prima donnas” for trying to get recognition for their work.

The problems continued with the release of sub-par ports of arcade games and poor first party games. The most cited example is E.T, The Extra Terrestrial, a game so bad, that over 6 million copies that were never sold sit in a landfill in New Mexico today. Kassar’s focus on marketing over quality was catching up to Atari, as the ports of games like Pac Man and Defender showed poor graphic qualities to the bigger, arcade counterparts. The lack of decent graphics was only the surface of the problem; another was the failing system sales. By 1982, the Atari was officially out of date, and the company released the Atari 5200, which was supposed to be the next-generation of gaming. Unfortunately the graphic quality was so similar to the 2600, and due to looser and unfriendly controls, the machine was a commercial failure. While the machine had some hits, such as Pitfall II and Dig Dug, it never captured the audiences.

All problems came to a head in 1983, when Kassar was in talks with Nintendo to bring their new system the Famicom, to America. The Famicom, or as we know it, the Nintendo Entertainment System, was a state of the art machine that produced detailed 8-bit graphics and was surprise success in the Japanese market. Kassar and Atari, who were losing millions of dollars at this point by the failure of the Atari 5200 and the lack of buyers for the staggering 2600, offered Nintendo to sell their machine in the U.S. The plan was to have Atari distribute the machine worldwide, and the contracts to sign it were to take place in the 1983 CES (Consumer Electronics Show) in Chicago, Illinois.

So what happened to this deal? Coleco, the creators of the Colecovision, were showcasing their new system at that very CES, the ADAM computer system. As a demo, the used the now arcade classic, Donkey Kong, to show off the new play control and graphics. Coleco actually owned the rights (at the time) to Donkey Kong for the home consoles, while Atari acquired the computer rights recently in their interactions with Nintendo. Because of this detail, Kassar became furious with Nintendo, accusing them of double-dealing behind Atari’s back (which, in reality, was Coleco’s fault for overlooking that minor detail.) Kassar threatened to sue Nintendo for infringement rights, and to call off the deal they made.

As fate would have it, Kassar was ousted from Atari one month after the CES, for insider trading and unlawful business practices as cited reasons for expulsion. The man who ruled Atari with an Iron Fist was gone, and the company imploded immediately. Soon after, the deal with Nintendo was canceled, chiefly because Atari could no longer afford bringing the system to America, and crumbled under the avalanche that would be known as the crash of 1983, which was an overproduction of video game machines and game titles that nearly destroyed the market. Nintendo, in turn, waited one year later to fine tune their machine, before marketing it themselves worldwide.

Who knows how the video game world would have been if Nintendo was bought by Atari. Perhaps they would of caved in along with the rest due to the crash that followed the fail deal in 1983. Perhaps it was fate that Nintendo would carry the torch from 1985-1995, until the Sony Playstation took it for the next ten years. Maybe it was just the poor business practices over executives in an emerging market, who had no idea how to sell video games, but whatever the reasons may be, the sad history of Atari is one for the books. Now an independent developer of usually sub-par games, Atari was once the king of the mountain in video games, but will no longer compete for that title due in part to the failings of it’s bureaucratic leadership and lack of knowledge of the new medium.

Atari’s failings are just one example of how you should never induce the wrath of the fans as well, since the outcry for change was also a part of the reason of the crash in 1984.While the company attempted to make comebacks with a few more systems, such as the Atari Lynx and Jaguar, the company was unable to capture the magic they once had. Regardless, Atari’s history is a perfect blueprint on how to not run a video game company, and served it purpose for keeping games popular in the infancy years of the video game boom. Today, gamers remember Atari for their 2600 system, a system that had a lifespan of nearly eight years, brought some of the most memorable games from arcades into your home, and paved the way for the great gaming giants to come.

Please note that I wrote this back in October 2007.

History is a funny thing. It never ends, it’s never predictable, and sometimes, the course of history can be traced to singular events in the timeline of the grand scheme of things. The ebb and flow of history just as strange, because it can change before it’s written, before it’s etched into the annals of manuscripts that scribe them down.

Video games, like all entertainment mediums, have their own history, and it has its ups and downs throughout their thirty years of existence. Looking back into the golden era of video games, which are considered two periods; the arcade revolution in the late seventies and late eighties, and the console boom after the infamous crash of 1984, one of the questions that I always ask myself is, what would happen if it turned out differently? What would video games be like if say, Nintendo never came to the United States? What if Atari ruled the virtual world? Why did Atari lose out in the end over the Japanese powerhouse known as the Famicom?

The Atari 2600 began in the late 1970’s as a push project to bring video games out of the arcades and into the home. Nolan Bushnell, the founder of Atari back in 1972, was trying to find the next big step in video entertainment after the mainstream success of Bushnell’s Pong. He spring boarded this by trying to gather extra funding for the system, and Nushnell’s big break came when the Time Warner Company purchased Atari for roughly $28 million, which brought enough revenue for the launch of the Atari 2600, known at the time as the Video Computer System (VCS), in 1977.

It is interesting to note that Nolan Bushnell would be eventually forced out of the company in 1978, and was replaced by Ray Kassar, who would be the head of the Atari company until 1984, ironically before the great crash that occurs that year. Kassar, who was a more strict and organized leader than Bushnell who was notorious for his laid back approach on leading, also shifted the focus of Atari’s funds from game development to marketing and sales.

Kassar’s decision to focus more on marketing may be a part of the reason for why the system was such a runaway success. Between 1977-1981, the Atari 2600 led all sales in the currently growing market of video games. This included systems like the Magnavox Odyssey2, Colecovision, the Mattel Intellivision, and the Vectrex system. Owning nearly 60% of the market share, and half of Time Warner’s income.

Kassar’s market focus was obviously not the only factor. The Atari 2600 had a slew of best selling games, mostly ports from the arcades. These included Space Invaders, Breakout, Donkey Kong and Pac-Man, which would become the biggest seller on the system. As well as that, great Atari exclusives, such as Adventure, Yar’s Revenge, and Pitfall made the system a popular success.

The technical aspects of the machine were cutting edge at the time, if not complex and difficult to develop games properly. The CPU was capable of 128 MB of RAM, using the MOS Technology 6507. The memory, which was a cut down version of current chip technology at the time, was expensive to produce. However, with this, the Atari 2600 was capable of a larger, 128 color palette that enhanced the graphics if used properly. To create a graphic on the screens, programmers had to scan and match the colors on the palette for each space the palette was needed. A touch sensitive joystick, a 12-button keyboard, a plastic paddle, and a driving controller made the Atari 2600 a diverse machine in terms of play control.

But what would lead to the machines demise? A lot of factors can be cited, but certain events definitely put the Atari 2600 onto the path of destruction. One of the most notorious problems with Atari, and the industry at the time, was that Kassar never let game developers receive credit for their creations. This angered numerous game makers, who felt they were shafted by not only a royalty standpoint, but also for recognition of their art. The most famous example is Activations own rebellion against Atari. Game developers began leaving Atari one by one, and formed the company in 1980, and sold their games out to not only Atari, but to eventually the Commodore 64 and the Colecovision. Successful games, such as Pitfall and River Raid, were released soon after on Atari, putting Activision on the map as one of the first third party publishers in video games. Kassar was enraged, and even sued Activision for insider trade secrets and stealing products from Atari. He even reduced himself to call the developers “prima donnas” for trying to get recognition for their work.

The problems continued with the release of sub-par ports of arcade games and poor first party games. The most cited example is E.T, The Extra Terrestrial, a game so bad, that over 6 million copies that were never sold sit in a landfill in New Mexico today. Kassar’s focus on marketing over quality was catching up to Atari, as the ports of games like Pac Man and Defender showed poor graphic qualities to the bigger, arcade counterparts. The lack of decent graphics was only the surface of the problem; another was the failing system sales. By 1982, the Atari was officially out of date, and the company released the Atari 5200, which was supposed to be the next-generation of gaming. Unfortunately the graphic quality was so similar to the 2600, and due to looser and unfriendly controls, the machine was a commercial failure. While the machine had some hits, such as Pitfall II and Dig Dug, it never captured the audiences.

All problems came to a head in 1983, when Kassar was in talks with Nintendo to bring their new system the Famicom, to America. The Famicom, or as we know it, the Nintendo Entertainment System, was a state of the art machine that produced detailed 8-bit graphics and was surprise success in the Japanese market. Kassar and Atari, who were losing millions of dollars at this point by the failure of the Atari 5200 and the lack of buyers for the staggering 2600, offered Nintendo to sell their machine in the U.S. The plan was to have Atari distribute the machine worldwide, and the contracts to sign it were to take place in the 1983 CES (Consumer Electronics Show) in Chicago, Illinois.

So what happened to this deal? Coleco, the creators of the Colecovision, were showcasing their new system at that very CES, the ADAM computer system. As a demo, the used the now arcade classic, Donkey Kong, to show off the new play control and graphics. Coleco actually owned the rights (at the time) to Donkey Kong for the home consoles, while Atari acquired the computer rights recently in their interactions with Nintendo. Because of this detail, Kassar became furious with Nintendo, accusing them of double-dealing behind Atari’s back (which, in reality, was Coleco’s fault for overlooking that minor detail.) Kassar threatened to sue Nintendo for infringement rights, and to call off the deal they made.

As fate would have it, Kassar was ousted from Atari one month after the CES, for insider trading and unlawful business practices as cited reasons for expulsion. The man who ruled Atari with an Iron Fist was gone, and the company imploded immediately. Soon after, the deal with Nintendo was canceled, chiefly because Atari could no longer afford bringing the system to America, and crumbled under the avalanche that would be known as the crash of 1983, which was an overproduction of video game machines and game titles that nearly destroyed the market. Nintendo, in turn, waited one year later to fine tune their machine, before marketing it themselves worldwide.

Who knows how the video game world would have been if Nintendo was bought by Atari. Perhaps they would of caved in along with the rest due to the crash that followed the fail deal in 1983. Perhaps it was fate that Nintendo would carry the torch from 1985-1995, until the Sony Playstation took it for the next ten years. Maybe it was just the poor business practices over executives in an emerging market, who had no idea how to sell video games, but whatever the reasons may be, the sad history of Atari is one for the books. Now an independent developer of usually sub-par games, Atari was once the king of the mountain in video games, but will no longer compete for that title due in part to the failings of it’s bureaucratic leadership and lack of knowledge of the new medium.

Atari’s failings are just one example of how you should never induce the wrath of the fans as well, since the outcry for change was also a part of the reason of the crash in 1984.While the company attempted to make comebacks with a few more systems, such as the Atari Lynx and Jaguar, the company was unable to capture the magic they once had. Regardless, Atari’s history is a perfect blueprint on how to not run a video game company, and served it purpose for keeping games popular in the infancy years of the video game boom. Today, gamers remember Atari for their 2600 system, a system that had a lifespan of nearly eight years, brought some of the most memorable games from arcades into your home, and paved the way for the great gaming giants to come.

Nice peace of history. Good stuff. I like the fact you're not afraid to offer your opinion on the history.

the NES arrival was probably the beginning of the end of Atari's role in the hardware business.