Have You Played Atari Today?
Atari’s infamous entry in the programmable home video game system race begins in 1975. The first Stella prototype is developed this year by Steve Mayer and Ron Milner, of the Atari consulting firm Cyan Engineering. Cyan is part of the company’s far-out Grass Valley, CA think tank, located northeast of Sacramento. A further prototype of the programmable system is then created by Cyan employee Joe DeCuir, with Jay Miner (who later designs the ground-breaking Amiga computer) further refining the Stella chip at Atari’s Los Gatos plant. The finished casing measures 23.5″ by 13.45″, constructed of plastic with a simulated woodgrain panel on the front to help the machine fit in next to family TV console sets. Two banks of three silver toggle switches perch near the top of the device, controlling power, B&W or colour display, difficulty levels for each player, game select to navigate through the various modes offered by some games and a reset switch to restart an inserted game. Named the Video Computer System (VCS), it barely arrives in stores in time for the 1977 Christmas season. It comes with the pack-in cartridge Combat, designed by programmer Larry Kaplan, along with DeCuir and Larry Wagner. Under the initial design of the console, Combat had been planned to be integrated right into the ROMs of the machine as a built-in game. The included cartridge combines two early Atari arcade games, Tank by the Kee Games subsidiary, as well as Atari’s Jet Fighter, released to the arcades in 1975. A dedicated home version of Tank, the name of which vascilates between just Tank and Tank II, is also announced by Atari for release in 1977. The console comes with two joysticks, rounder variations of the controllers that will eventually ship with the VCS, with a single fire button and a flared tip. These sticks can be placed into two holders in the Tank II unit, allowing one player to control the left and right treads of the tank separately. In two-player mode, the sticks can be taken out for each player. Tank II is quietly canceled by Atari after the release of the VCS and its Combat game. With the VCS setup, there are two rheostat paddle controllers included as well, to facilitate comfortable play of the various PONG-type games to be sold for the console.
Pushing Bushnell Out
Running a 1.19 MHz 8-bit Motorola 6507 microprocessor, the VCS retails for $249.95. Initially, the designers of the system figure that it would only be playing tank battle games and PONG-esque titles, so the allocated ROM memory for the programs is 2K. It is eventually decided to bump that to 4K, even though no game at the time uses more than 1K and there is little hope that any program would ever need as much as 4K. Upon release, nine cartridges are introduced along with the system. While there is very little mark-up on the machines due to the high price of the components, the carts cost very little to produce, and sell for around $40 each. Sound is sent through the speakers of the television hooked up to the device, allowing users to hear the action as loud or as soft as they like.
For two years the VCS struggles to find a niche in the marketplace, and Atari profits drop precipitously, substantially dragging down parent company Warner Communication’s stock price. There are major production problems, including defective chips and cases, and the easy-going Zen attitude of Atari co-founder and CEO Nolan Bushnell, who describes himself as “a bizarre manager”, starts to wear out his welcome even with Warner head Steve Ross, himself a chairman noted for having a laissez-faire management style. Things get so bad for the VCS that Bushnell dramatically stands up during an Atari/Warner budget meeting and suggests that the console have its price slashed and be discontinued by the company. It remains in Atari’s catalog, but under pressure from above, it is Bushnell who exits the company in 1978, with a multimillion dollar package, but with strings attached. A 5-year “no-competition” clause is cited by Atari for a later lawsuit launched against Bushnell and Sente Technologies, a video game company he starts in early 1983. Atari and Bushnell eventually reach an agreement in the fall of that year, with his former company gaining the consumer rights to any arcade games released by Sente.
After Bushnell’s exit, the work atmosphere changes perceptively as new head Ray “The Czar” Kassar cracks down on the relaxed attitude towards dress and work hours that the ‘hippies’ at Atari had previously enjoyed. Following a $120 million infusion of cash from Warner, in 1978 Atari produces 800,000 VCS units. The VCS is selling; Atari moves over a million units between 1977-1979. Still, that’s only on the cusp of the kind of mass-market penetration Atari is looking for to be a real success. Belying his allegiance to marketing over technical innovation, Kassar quickly halts funds for R&D and pours $6 million into an advertising campaign to help move VCS consoles off the shelves. As a whole, 1979 sees about 1-1.5 million U.S. homes with some kind of game console. These systems require games, so somewhere between 3-4 million cartridges are sold for them this year.
By 1980, there are 36 cartridges available for the VCS, including a simplified version of soccer featuring three players a side, plus goalies. After signing Brazilian football superstar Pele in 1980 to a five-year contract as spokesman, Atari quickly changes the name of the game from Soccer to Pele’s Soccer, resulting in one of the earliest celebrity athlete video game endorsements. But the company is about to make a move that will truly blow the lid off the home videogame industry. In 1980 Atari becomes the first home videogame company to license an arcade game. It is Warner executive Manny Gerard who realizes the enormous home potential for arcade hit Space Invaders, originally made by Japanese game maker Taito and then licensed for North American release by Midway. He persuades Kassar to enter into an agreement with Taito for exclusive non-coin-operated, personal computer and handheld electronic game licences for Space Invaders, and the home video game version becomes the killer app for the VCS; people rush out and buy the system just to play the game. There are 112 different variations on gameplay available, including invisible aliens, moving bunkers and simultaneous two-player action. Selling over a million cartridges in its first year, the arcade adaptation rakes in over $100 million for Atari, as well as moving tonnes of VCS’s to people who want to play the game. Game designer Rick Maurer, however, only earns his $11, 000 salary that year, and eventually moves to the Atari arcade division and their more favourable bonus program. Atari’s attitude towards its game creators is that they should remain anonymous, and that the games are identified as a corporate creation rather than the effort of individual employees. In a response to that, Warren Robinett hides his name within his VCS game Adventure, a graphical version of Will Crowther and Don Woods’ text adventure Colossal Cave, aka Adventure. This is widely recognized as the first hidden “Easter Egg” within a video game, although it does attract the ire of upper management.
Over the next two years, the Atari VCS completely dominates the home videogame market, its only rival of any significance being Mattel’s Intellivision unit. Profits for the company jump from $6 million in 1979 to $145 million in 1981, on sales of over $1 billion. Bucking industry convention, the idea of keeping toy promotion only to the end-of-year Holiday season is thrown out the window ; Atari begins pushing the VCS and all of its games throughout the year, including a $75 million ad campaign through 1982. The company also spends $334,000 for a commercial spot during Super Bowl XVI. Combined with $25 million in co-operative ad dollars spent by Atari dealers, Atari figures this makes them the biggest spender in advertising for a single brand in America. This year also sees Atari provide full sponsorship of a prime-time science education series of TV specials produced by two alumni from the PBS series Nova, Graham Chedd and John Angier. Titled Discover: The World of Science, it is produced in association with science magazine Discover, and airs on around 75 stations across the U.S, covering more than 80% of American homes. Hosting duties for the show are carried out by Peter Graves, of Mission: Impossible and Airplane: The Movie fame. Atari co-produces some episodes at a cost of $1 million each which promote computer use and literacy, a nice bit of synergy with the company’s 8-bit home computer line. After the video game market evaporates in 1983-1984, the science series finds a home at PBS.
The VCS monopolizes family use of the television set to such an extent that TV pundits start referring to the “Big Four” networks: CBS, ABC, NBC and Atari. Over the course of its production run, over 200 games are produced for the VCS/2600 by 40 manufacturers. Approximately 120 million cartridges are sold, and there are 55 different compatible videogame systems eventually released world-wide. Atari, the company that had shrunk Warner Communication’s market share during the early days of the VCS is now responsible for half of the mother corporation’s profits, with revenues for Warner in 1981 alone amounting to $1.23 billion.
Trouble In the Ranks
After the VCS has launched, Atari director of consumer engineering Kerry Crosson has a discussion with president Joe Keenan and newly installed CEO Ray Kassar. The idea is to provide an incentive bonus plan for his department, responsible for creating console hardware and designing games for it. It is agreed that a pool of profits will be set aside for bonuses; 50 cents for every system that sells, and 10 cents for every cartridge. When spring rolls around the next year, with VCS units having moved off the shelf during launch and games to go with them, Crosson inquires as to the state of the bonus pool. He gets a point-blank “What bonus plan?” from upper management, and is told that any agreement for one must have been a case of misunderstanding by Crosson and his department. Thus, Crosson must go back to consumer engineering and inform the department that no bonuses are forthcoming. This announcement causes a massive revolt in the department, forcing consumer engineering VP John Ellis to offer incentive deals under the table to those whom management deems key personnel. Atari game designer David Crane sees his salary rise from $18,000 to $25,000 during this period, but the broken promise from management over the evaporating bonus pool leaves a bad taste in his mouth. Then, one day in 1979, Crane finds himself intently analysing a list of numbers on piece of paper. It is a memo from the marketing department, a part of Atari that has flourished with the ouster of engineer Bushnell and the instalment of salesman Kassar. The list, circulated throughout consumer engineering, ranks game sales figures for 1978, with each game as a percentage of overall sales for the company. It is Marketing’s not so subtle advice to the programmers: make more games like those at the top of the list, and less of those at the bottom. It also has an unintended effect on Crane and fellow game creators Larry Kaplan, Alan Miller and Bob Whitehead… they learn that the four of them are responsible for all of the top-selling games, 60 percent of cartridge sales for the year. With the knowledge that Atari made 100 million in sales that year, you don’t need a degree in computer mathematics to know that the four of them, each pulling in a salary of $25,000 – $30,000, have accounted for $60 million in sales for Atari. Armed with this evidence, the four meet with Kassar to request more financial compensation for their efforts. The CEO is unmoved, suggesting that making games is a team effort and their contribution on par with the assembly workers on the line who fit together the cartridges. Soon after this exchange, the group get in touch with an attorney about incorporating their own business, making software for game consoles. Kaplan leaves Atari soon after the meeting with Kassar, with Crane, Miller and Whitehead not far behind. The Gang of Four has left the building.
Via their attorney, the group is put in contact with former music industry executive James H. Levy. Armed with a business plan that predicts explosive growth in the video game and home computer markets over the next several years, on October 1, 1979 the four game designers and Levy form the first third-party manufacturer of videogame software, with Levy running the company. As president, Levy comes up with the company name Activision, invoking the idea of ‘Active Television’, as well as the rainbow logo and a unified packaging design. Also on board is venture capitalist Richard Muchmore providing funds. With around $700,000 in venture capital, the Mountain View, CA upstart starts releasing product. Dragster, Crane’s adaptation of the 1977 Atari/Kee coin-op Drag Race, is the first game independently released for the VCS, in mid-1980. It’s followed closely by Checkers, Boxing and Fishing Derby. Atari launches the obligatory lawsuit over the company, to the tune of $20 million, which ostensibly concerns patent rights and non-disclosure agreements the former Atari employees had signed, but is really about Atari losing its ability to monopolize its share of a market that would have 3.5 million installed systems in the U.S. overall by Christmas. In December the two companies settle, with Activision paying Atari for a “technology license” to produce games for the VCS. By 1981 Activision posts sales of $65 million in software, placing it second only to Atari.
52 games in total are released by Activision between 1980 and 1988, with the designers’ identities prominently featured in all packaging. Not afraid to land some attention with publicity stunts, to promote Stephen Cartwright’s Barnstorming at the 1982 Winter CES the company taxis a bi-plane through the streets of Las Vegas to the convention centre, press in tow. Anything to stand out in a rapidly crowding market, where 15 million consoles have been sold, accompanied by 65 million cartridges. To increase its stable of programming stars, Activision adds a new Eastern Design Center in New Jersey, swelling the company’s design ranks with the likes Dan Kitchen, who is joined there later by his brother Garry, coming over from the Quaker Oats-owned U.S. Games. At his former company, Garry had created probably their most popular game, the shooter Space Jockey. John Van Ryzin also joins the Eastern Activision team. Another addition to the Activision crew is Carol Shaw, a former Atari programmer who had made early VCS games Checkers and 3D Tic Tac Toe for the company. At her new digs, she creates the hit River Raid, as well as Happy Trails for the Intellivision. Also on board is Stephen Cartwright, with yet another Kitchen brother, Steve, joining the company in 1983. With their names and faces featured on game boxes and manuals, these game creators become so famous they’re stopped in the streets for autographs by game aficionados, and collectively receive around 12,000 fan letters a week. On Dec. 18, 1981, Jim Levy cuts the ribbon on a new, 92,500 square-foot factory in Milpitas, CA., and Activision sees its production capacity increased by 1000%. By March of 1982 the facility has shipped more than 1 million cartridges.
Some well-known Activision releases: Stephen Cartwright’s Barnstorming, Megamania (1982), Hacker (C-64 1985) and Hacker II: The Doomsday Papers (Atari ST 1987) David Crane’s Freeway (1981), Laser Blast (1981), Grand Prix (1982), Decathlon (1983) and Ghostbusters (1984) Larry Kaplan’s Kaboom! (1981) Garry Kitchen’s Keystone Kapers (1983) Steve Kitchen’s Space Shuttle: A Journey into Space (1983) Alan Miller’s Tennis (1981), Starmaster (1982), Enduro (1983) and Robot Tank (1983), John Van Ryzin’s H.E.R.O. (1983) Carol Shaw’s River Raid (1982) Bob Whitehead’s Stampede (1981) and Chopper Command (1982). Activision promotes its games heavily, including lavish theatrical ads run in movie houses in 1982 for Starmaster and Chopper Command.