Wishing Upon a Telstar
The Connecticut Leather Company is founded in West Hartford, Connecticut by Russian immigrant Maurice Greenberg in 1932, selling shoe repair supplies out of a shop on Market Street. Joining the family business after graduating from Hartford’s Trinity College with a Bachelor of Science degree in mathematics in 1948, his son Leonard champions a move to leather craft kits featuring character licensing from the likes of Disney and Howdy Doody. He also moves the company into vacuum form plastic molding in 1957 and sells off the leather business as their plastic products like sandboxes and toboggans go soaring off store shelves. Shortening their name to Coleco in 1961, by the end of the decade they are the largest manufacturer of above-ground swimming pools. Lawyer Arnold Greenberg joins his father and brother in 1966, and Coleco makes its first move into games two years later by acquiring Eagle Toys, a Canadian maker of popular rod hockey tables that becomes Coleco Canada.
The company becomes a publicly traded entity on the NYSE in 1971, and Maurice’s two sons Leonard and Arnold take the helm in 1973, with Leonard handling the manufacturing and engineering side and Arnold covering the finances and marketing. In a quest for diversification, Coleco purchases Canadian company Featherweight Corporation, makers of the Alouette snowmobile line, in March of 1972. With a name change to Alouette Recreational Products, Ltd., this division of Coleco Canada diversifies into the off-season with the design and production of its first motorcycle, the AX-125 dirt bike, with disastrous results. A limited run of around 600 bikes, all flagged by the U.S. National Highway Traffic Safety Administration with multiple defects and subject to a safety recall. Losing millions on the company, Coleco divests itself of Alouette in 1975. That same year, the success of Atari’s home PONG game opens up a new genre of entertainment, and shows Coleco the path out of possible bankruptcy.
Ralph Baer, inventor of the first home video game Odyssey by Magnavox, gets wind of this new “PONG” chip, and tips off his friend Arnold Greenberg. Thus does Coleco become GI’s first customer for the sensational silicon. At a cost of $5 to $6 per chip, depending on volume pricing, the rush on this IC is so intense that only Coleco receives their full shipment, early enough to mass manufacture a large enough supply of videogame units for sale through 1976. The release of its Telstar video table tennis unit in May of the year, retailing for half as much as Atari’s console, increases the company’s overall sales by 65 percent; sales of the console for 1976 exceed $110 million. The million-seller $49.95 Telstar home PONG clone gives Coleco a taste of the profits to be had in electronic video games, and it thirsts for more. The company produces nine more varieties of the Telstar unit, nearly bankrupting itself again in 1978 as the home videogame market moves over to programmable, cartridge-based game units. They try to up their game with their own cartridge-based entries like Telstar Game Computer and Telstar Arcade, but the graphics of these machines aren’t much above PONG. With game manufacturers slashing the price of their own dedicated consoles up to 75%, Coleco is forced to dump over a million obsolete Telstar machines at a cost of 22.3 million dollars.
The Third Wave
Coleco’s line of electronic handheld sports games such as Electronic Quarterback and the Head-to-Head series help keep the company afloat in the late 70’s, with $200 million in sales for the devices posted in 1979, and $400 million for the handheld electronic games industry overall in 1980. This leads the brothers to ignore the near disaster experienced with the Telstar PONG clones and fund a new R&D video game division to the tune of $1.5 million. The team is led by Eric Bromley, who has experience under his belt heading the R&D departments of coin-op companies such as Midway. Bromley’s team is charged to develop a new third-generation home videogame system, one that will set the standard in graphics quality, performance, and expandability. Bromley himself had done preliminary work in designing and costing a system several years earlier, but the high cost of RAM kept an advanced console out of reach.
Koming with Kong
The key to the success of this new machine is to be its pack-in cartridge, an adaptation of the smash arcade hit Donkey Kong. Coleco sends Bromley over to Japan to negotiate the rights, where imposing Nintendo chairman Hiroshi Yamauchi presents him with an ultimatum. Either agree to a pay Nintendo a $2 royalty per cartridge sold and wire a $200,000 advance by the end of the day or risk losing the license to either Atari or Mattel, both of whom are scratching at the door looking to buy. Bromley makes the call to Greenberg and convinces him that the rights to the biggest hit since Pac-Man are within their grasp. A verbal agreement to the Donkey Kong license is made. Bromley later gets a scare when Nintendo informs him they have changed their minds and decided to give Atari the license, but an impassioned plea to Yamauchi persuades the usually iron-willed Nintendo president to stick with the original Coleco deal and later grant Atari only the home computer rights.
That Arcade Quality
Along with Donkey Kong, twelve additional cartridges are announced along with the ColecoVision. While Atari had pioneered the licensing of arcade games for home play with Space Invaders, Coleco makes this a key part of their strategy, aggressively seeking licenses for coin-op games instead of concentrating on creating original titles. Outside of the pack-in cartridge, the first batch of arcade conversions are Lady Bug, Mouse Trap, Venture, and Cosmic Avenger. Through a far-reaching agreement with Sega/Gremlin, Coleco also licenses their popular arcade games like Turbo, Carnival, Space Fury and Zaxxon. Three Exidy games are also announced as arcade conversions, but ultimately cancelled: Side Trak, Spectar and Rip Cord. The department inside Coleco developing these translations is staffed by around 30 artists, designers and programmers at start up. Once the rights to an arcade game is secured for the ColecoVision, the design team receives an arcade unit that joins its brethren in the “game room”. Lacking any technical source material, the game designers at Coleco must videotape gameplay from the coin-op version for reference while translating the game. The usual timeframe for development of a game at Coleco is three to four months. While the conversions are not flawless interpretations, they are one giant step towards capturing the graphics and game mechanics of the original coin-op for play at home. One fly in the ointment, however, is the seemingly interminable (at least for an anxious kid desperately waiting to play the game) ten-second or so delay between turning on the console with a cartridge inserted, and the game selection screen showing up. This can be chalked up to Coleco wanting to get as many arcade game hits out on their game machine as possible; the initial suite of games for the ColecoVision are programmed in PASCAL, an easier language to create in than the machine language the Z80 CPU natively deals in. While this allows for speedy development, the console must put the brakes on and parse the information from the cartridge at the start of each of each new play session.
Hitting the market in the midst of the public relations war Atari and Mattel are waging against each other, Coleco’s new system sells for around 50 dollars more than the 2600 but also 50 dollars less than Mattel’s Intellivision. Distribution of the powerhouse console outside of North America is handled by CBS Electronics. The ColecoVision is an instant success, with the first run of 550,000 machines selling out by Christmas 1982. In the first quarter of 1983, Coleco reports that one million of the devices have been sold in total, along with eight million cartridges. Coleco stock enjoys an amazing run, named the best performer on the NYSE for 1982, increasing from 6 7/8 to 36 3/4 over the year. Helping the balance sheet along is the incredible reception of Coleco’s electronic tabletop replicas of arcade games, including Pac-Man, Donkey Kong and Galaxian. Even with over 200,000 units coming off the production line by 1982, early in the year, Coleco must withdraw their TV ad campaign for these devices in the NYC area due to a lack of ability to keep up with demand.
Coleco also leverages their arcade game licenses with versions for other game platforms at the end of July of 1982. Cash ape Donkey Kong arrives on the Atari VCS scene first, along with shooting gallery game Carnival, adapted from the Sega coin-op. Zaxxon and Turbo are scheduled for the following few months. Mousetrap, as well as Smurf Action are to hit shelves by the Christmas season. The unfortunate sounding latter title is eventually renamed Smurfs:Rescue from Gargamel’s Castle.There are also home versions of games for the Intellivision released by Coleco, including a dubious Donkey Kong adaptation released towards the end of August. The company’s performance on the stock exchange leads the New York Times to name Coleco as one of its 10 Super Stocks of 1982. Sales revenue for the company has tripled from $178 million in 1981 to $510 million through 1982.