Activision itself has its best year financially ending in March 1983, with income peaking at $157 million. The company has five video game titles with sales over a million units each. The next month, Activision goes public, selling four million shares at $12 per share. Unfortunately, the ensuing three months are kind neither to Activision nor the video game industry in general, resulting in an announced loss of $6-10 million, before tax, by the company. Following this announcement, company stock price is halved to $6 a share and subsequently drops to under $2 a share. The obligatory class action lawsuits are then filed by disgruntled investors.
Imagic Enters the Fray
Inspired by the great success Activision is enjoying in its early years, Los Gatos-based Imagic becomes the second third-party software manufacturer. Former Atari vice president of marketing Bill Grubb forms the company under a $2 million business plan, founded on July 17 1981. He is joined by Dennis Koble, who in 1976 was one of the first programmers hired by Atari. Also part of the founding team is ex-Mattel Electronics alums, Jim Goldberger and Brian Dougherty. Dougherty asks Pat Ransil, a classmate of his from U.C. Berkeley, to come along for the ride. Imagic Corporation’s staff is initially made up of 10 employees, consisting mostly of former Atari and Mattel crew. The list of programmers includes Rob Fulop, who at the tender age of 21 had been hired by Atari in 1979. While toiling in obscurity at the company, in 1980 Fulop created a VCS version of the 1978 arcade hit Night Driver. He also pumped out a version of Space Invaders for Atari’s 400/800 computers the same year. Next came his masterful adaptation of Missile Command to the VCS in 1981, into which he also hid his initials as an easter egg for astute gamers to find. That same year he leaves Atari to join Imagic, and there Fulop designs Demon Attack over a five month period. It debuts at the 1982 Winter CES in Las Vegas as one of the three initial cartridge offerings from the company, along with Star Raiders knock-off Star Voyager and pool game Trick Shot. Demon Attack becomes the best-selling Imagic cartridge, moving over one million units and ported to numerous video game and computer platforms. It also plucks the 1983 Videogame of the Year award from the pack, awarded in the pages of Electronic Games magazine. Out of the “gamestorming” sessions held to create new game ideas, Fulop also creates hit Cosmic Ark for Imagic, along with the idea of linking the game with Koble’s Atlantis; when the player loses at the end of Atlantis they’ll notice a ship taking off amid the destruction. This is the Ark from Cosmic Ark, charged with collecting species from new planets to help the Atlanteans repopulate. Fulup also populates the Imagic catalog with the lesser-known Fathom and a very rare Rubik’s Cube game called Cubicolor. Also on board at Imagic is VCS Video Pinball creator Bob Smith, who’s output for the company includes Riddle of the Sphinx and Dragonfire. The company expands to a staff of 250, with sales of over 125 million dollars. Not one to be outdone by “the other” third-party game maker, Imagic moves into an ambitious 123,000 sq. ft. office and manufacturing plant in 1982. Part of their plan from the beginning, Imagic expands their roster of games from just the Atari 2600, to include cartridges for the Intellivision and the Odyssey² as well as Atari’s 8-bit computer line.
Activision survives the crash by pivoting to the booming home computer market, the groundwork having been laid with the conversion and expansion of Carol Shaw’s River Raid and Larry Kaplan’s Kaboom! for the 400/800 Atari home computers in October of 1983. Co-founders Alan Miller and Bob Whitehead leave in 1984, eventually forming their own development/publishing house Accolade. Their first product is a home-run: popular computer baseball game Hardball!, released in 1985. Activision themselves are further buoyed by the success of such computer games as Steve Cartwright’s Hacker, Alter Ego by Peter J. Favaro, and David Crane’s life simulator Little Computer People. Cartwright joins his former Activision office-mates over at Accolade in 1988. Activision stumbles in the fiscal year 1987, posting a $14.6 million loss that is attributed to various acquisitions and R&D writeoffs. The company changes its name to Mediagenic in 1988, hoping to ride the multimedia wave opened up by the emergence of disc-based storage media, while still retaining the Activision label for its video game products. It also signifies a branching out to business productivity software. At the helm is President and CEO Bruce Davis, and the company releases the first ever PC entertainment CD-ROM, The Manhole, for the Apple Macintosh. Originally a B&W point and click adventure game for the Mac classic, the program is designed by Robyn and Rand Miller of game company Cyan. They would later create waves by making the phenomenally successful game Myst for computers. Mediagenic reaches a settlement with Magnavox over a patent infringement lawsuit filed in 1982, over 11 cartridges released by Activision for the Atari 2600. Mediagenic agrees to pay the pioneering video game company $6.6 million awarded by a U.S. District judge earlier in 1990. This takes the form of monthly $150,000 payments to be made from July 1990 to December 1993, ending with a balloon payment also made in the final month. Tallying up losses upwards of $60 million, Mediagenic eventually files for bankruptcy protection in 1991, and the company is restructured later that year with the name returning to Activision, and Bobby Kotick running the company.
The Imagic’s Over
As for Imagic, they don’t quite make as successful a transition, a result of over-reaching, underperforming and just plain bad timing. Looking to raise capital to maintain their ambitious game release schedule, in late 1982 the company files with the SEC to make a public offering of stock in the company. The problem is that during the review period for the IPO, Warner Communications makes its fateful announcement that Atari has underperformed in the fourth quarter of the year. This sends a shockwave through the markets and Warner shares plummeting. This has such a detrimental effect on Imagic’s financial footing that the IPO filing has to be pulled. In the wake of high-profile game failures such as E.T. and Raiders of the Lost Ark, buyers and distributors begin demanding that video game companies like Imagic buy back unsold inventory. The company capitulates in order to keep preferred positioning on store shelves but must burn up $12 million worth of their privately held stock to pay for it all. An announcement in the later part of 1983 indicates their intention of adding home computer software to their library of games. Another announcement in October, however, reveals that Imagic has laid off most of its staff. The intention of the company is to drop the manufacturing and distribution part of their business and become a video game design house only. In the end, after having to produce 25 or so games for various home consoles, Imagic folds up shop in 1986, another victim of the big crash.
Riding the Digital Wake
The VCS also becomes a cottage industry for third-party developers of hardware add-ons for the system. The SuperCharger is released by Arcadia and designed by former Atari engineer and home PONG co-creator Bob Brown, also serving as executive vice-president of the company. Another former Atari employee, Craig Nelson, is also involved in the venture. They are forced to change their company name to Starpath after threats of litigation from Emerson Electronics, maker of the Arcadia 2001 home game console. The SuperCharger, costing $44.95, is an outsized cartridge that plugs into the VCS and adds an extra 6K of RAM memory available to the system. It also boosts the graphics capability, allowing for hi-res output. A cable comes out the side of the SuperCharger and ends in a 1/4 inch audio jack, which users plug into the headphone jack of any regular cassette recorder. They can then play games sold by Starpath on audio cassette tape, with each priced at an attractive $14.95. Loading a game in via this procedure usually takes about 30 seconds, and a clean duplicate version of the game is offered on the other side of the cassette if something goes wrong with the original. Phaser Patrol is the tape packed in with the SuperCharger, a graphically advanced version of the popular game Star Raiders for Atari’s 400/800 computers, and then later for the 2600. Others games, such as Escape From the Mindmaster and Communist Mutants From Space, are released for the system by Starpath. The company is eventually bought out by computer game maker Epyx.
In the Key of Atari
A few companies also try to make good on the “computer” part of the name Video Computer System, developing prototype computer add-ons with keyboards and storage devices. In 1983, Atari announces an under-$90 attachment that fits easily into the 2600 cartridge slot, offering users a 56-key, chiclet-style keyboard and 8K of RAM, expandable to 32K with add-on modules. Inside the add-on is the vaunted 6502 microprocessor, also seen in Atari’s 8-bit computer line. The system will output a 192×160 graphics resolution and a text screen format of 32 columns by 24 rows. It also has two sound generators. Initially called My First Computer, built into the system is the Microsoft BASIC programming language, combined with specialized graphic and sound statements from Atari BASIC. There is also a connection for any regular cassette tape recorder to allow data storage. The unit can also accept standard 2600 game cartridges through a slot on its side, as well as a planned new library of around 20 new cartridges at launch, featuring entertainment and educational programs. some enhanced to take advantage of the keyboard. In addition, the expansion module will also be able to accept Atari’s planned storage system utilizing high-speed, 1/16 ” wafer-tape cassettes holding 128K of data. Eventually renamed The Graduate, other peripherals are announced for the keyboard, such as a 40-column thermal printer, as well as a modem. The whole shebang is promised by Atari for September of 1983 but ultimately postponed indefinitely by the company after the introduction of their XL computer line. At $150, the 600XL is priced only slightly higher than the projected cost of the Graduate.