Trouble In the Ranks
After the launch of the Atari VCS game console in 1977, 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. Some popular games from the department are pulling in big money for Atari and innovating in the marketplace, including Alan Miller’s breakthrough 1978 game Basketball, where the designer creates a trapezoid playfield that gives a previously thought impossible appearance of 3D play on the VCS and allows the two on-screen players free-range around the court. Miller would port the game to Atari’s 400/800 home computers the following year, and Chris Downend translating a B&W version to the arcades.
During the meeting between Crosson and upper management, It is agreed that a pool of profits will be set aside for bonuses for his department; 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 pool?” 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 workers that no bonuses are forthcoming. This announcement causes a massive revolt in the department, forcing 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 early in 1979, Crane finds himself intently analyzing a list of numbers on a 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 installment of salesman Kassar. The list, circulated throughout consumer engineering, ranks game sales figures for the previous year, 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 yearly 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 gets 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. A business plan is developed over the summer of 1979, which 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. Computervision is floated as a possible company name but found to be already taken. The organization is eventually incorporated with the name VSYNC, short for Vertical Sync, a technical term when working with the VCS. As president, it is Levy who comes up with the final company name Activision, invoking the idea of ‘Active Television’, as well as creating a unified design for game packaging. What’s known inside Activision as the “Flying ‘V'” logo design is also created by Levy, and it is included in a 32-pixel, eight-line space at the bottom of the screen in every Activision game. In order to fit this icon, the ‘T’ and the ‘V’ must be connected to save memory.
Also on board for the formation of Activision are venture capitalists such as Richard Muchmore and Sutter Hill Ventures providing funds. With around $700,000 in venture capital, the Mountain View, CA upstart starts its first project, in David Crane’s spare bedroom: reverse engineering the VCS and making a game development system for it. The first game independently released for the VCS is Dragster, in mid-1980.
That first game is also one of the reasons that Atari launches the obligatory lawsuit against Activision, to the tune of $20 million. It ostensibly concerns trademark infringement over Dragster, which is a carbon-copy of Drag Race, an Atari/Kee Games coin-op from 1977. Other violations mentioned in the suit are patent rights issues and the breaking of non-disclosure agreements the former Atari employees had signed, but it 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. Activision shows off their first four games at the 1980 Summer CES in Chicago: along with Dragster, they are Fishing Derby, Checkers and Boxing. Shipments of these games hit store shelves in July of 1980. By the Fall of the year, the company reports sales that have more than doubled the company’s own projections. In December Activision and Atari settle their dispute, with Activision paying Atari for a “technology license” to produce games for the VCS. In 1981 Activision posts sales of $65 million in software, a 1000% increase over the previous year, placing it second only to Atari for games sold.
52 games in total are released by Activision between 1980 and 1988, with the designers’ identities prominently featured in all packaging. 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. Yet another Kitchen brother, Steve, joins 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.