Terrible Atari E.T. video game for Atari 2600 video game system

THE HOLES! The terrible E.T. video game for the Atari 2600, 1982

The Great Video Game Crash - End Game

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Entire Industry, 1983-1984

Lead Up to the Great Video Game Crash: High Hopes

Video arcade from 1982

Video game Valhalla – A splendid video game arcade during the salad days, Massachusetts, 1982

Through 1982, things look pretty rosy for the video game industry, with over 10,000 video game arcades in business by the end of the year. Home games have expanded as well, as cartridges move into mainstream retail venues like large video cassette and music stores, where, in the case of the latter, video games can account for a 25% increase in sales over the year for a retailer. Together, arcade and home videogames form a $7-billion dollar industry.

Image of the show floor from the 1983 Winter Consumer Electronics Show (CES)

The Winter CES show floor, January 1983, Las Vegas

For the year, sales in home video games alone across the board rise from 950 million dollars the previous year to $3.2 billion. 15 million consoles have been sold in the US overall, along with 65 million cartridges. 25% of American homes have at least one system. By midway through the next year, there will have been over 12 million 2600‘s alone sold by Atari. They are the clear leader in 1982, starting the year with a 70 percent share of the video game market. They are also a company that employs almost 10,000 people, around 7,000 of whom work in a sprawling system of buildings around Silicon Valley in California. There are over 200 games available their system, with new batches hitting the market every week. Owned by Warner Communications, Atari makes about 5 times the revenue of Warner’s film division and accounts for over 60 percent of the mother corporation’s profits. As for the other major players in the market, a million Intellivision’s are sold by Mattel in 1982,  and 1.5M ColecoVision sales for Coleco.

Who says video games are harmless. They drove this family insane! 1982 Atari ad

Also a leader in advertising dollars, Atari has spent $28.5 million on TV ads for the first nine months of 1982; they spent only $21.1 million throughout the entire year previous. By the end of the year, Advertising Age estimates that Atari will have spent $75 million on ads, or triple the amount it spent the year previous. Main competitor Mattel spends $21.1 million advertising its Intellivision, trying to retain its 18% – 20% share of the market. Total network time taken for video game advertising is estimated to reach $100 million for 1982-1983. 1984 even sees Atari named as the official sponsor of home computers, arcade and home video games for the Olympic Summer Games, held in Los Angeles. This entails computers and games for participants in the Olympic Village, an arcade set up at the ABC International Broadcast Center for use by the 1000’s of media personnel, and direct sponsorship of the U.S. Women’s Volleyball team. Atari also contracts with official Olympic broadcaster ABC to air 75 commercials across the Winter and Summer games, ensuring the company has huge exposure during the festivities.

1982 Summer CES featuring Atari 2600 video game console

Attendees of the 1982 Summer CES line up to play games on the Atari 2600 console

What’s not so publicly known is that Atari has already begun stumbling on the playing field. By the end of 1983, it and the rest of the industry was steadily unraveling. By the end of 1985 the videogame landscape in North America has become desolate, with every major videogame system up to that point either having being sold to independents or discontinued altogether. Buyers for retail outlets who went all-in on video games have found themselves out on the street, and distributors have been left stuck with warehouses full of unwanted cartridges. Faced with a cut of income by the end of 1983 by anywhere from a third to 50% compared to the boom years, arcade video game distributors and manufacturers who had thrown money around on wild expansion of fixed-cost expenses like huge new warehouses and manufacturing plants are now paying the piper… or not paying their debtors. An industry that had practically sprung up overnight to dominate the entertainment sector misses the rings and falls flat on its face.

Ad for 1982 Atari arcade games

How much further can the Atari Era go? Not much farther, as it turns out

Atari arcade games, 1983 AOE

Atari booth at the March 1983 Arcade Operators Expo, Chicago

The Awful Atari Pac-Man Home Adaptation: Pac-Mess

If you have the constitution for it, click the button to play the awful Atari 2600 Pac-Man adaptation

Atari, comprising 2/3 of the industry, bears the brunt of the shakeout. The first sign of trouble comes with the awful Atari Pac-Man home adaptation 2600 version of Pac-Man, programmed by 25 year-old Tod Frye and released in late March of 1982. Frye is an odd choice to be assigned the work of translating the flagship arcade game of the time: he is a high-school drop-out and former homeless, panhandling, drug-dealing hippy, whose previous claim to fame at Atari is being the programmer of the Atari 400/800 port of Asteroids. That, and the “sprinkler lobotomy” – the time he was into the habit of moving around the Atari building without touching the floor by propping himself up on the walls with his legs and shimmying along…. and smashed his head against a ceiling sprinkler, requiring a bloody trip to the hospital and several stitches in his scalp.  Thanks to the words “Pac-Man” on the box, along with a $15 million advertising blitz, Frye’s translation sports an amazing one million cartridge advance order from retailers and goes on to become the biggest-selling Atari cartridge ever. Warner Communications, when reporting income of its consumer products division for the first quarter of 1982, assigns much of a 180% rise in operating revenues to Atari and the home version of Pac-Man. It becomes rapidly apparent upon release, however, that the quality of the game is awful, bearing only a very passing resemblance to the coin-op.

JUMP: History of the arcade version of Pac-Man

The graphics in the VCS port are horribly blocky, with the title-character a malformed circle with a bad case of lockjaw; his mouth opens and closes at a painfully slow rate, with the movement more like a mashing than the satisfying gobbling of the frantically-paced arcade version. Moving sluggishly around a maze that bears no resemblance to the layout of the coin-op game, the player gums thick dashes called “video wafers” to death instead of dots. The uni-coloured ghosts are a vision of massive flicker, almost invisible as they move around the maze, their eyes rotating meaninglessly. When one of the flashing square “power pills” is swallowed by Pac-Man, the ghosts turn a purple-ish shade of colour indicating their vulnerability to consumption, although the flickering makes it hard to tell the change has occurred or when it ends. The various-shaped prizes that Pac-Man can gobble up for points in the arcade game are represented here by a two-tone coloured block called a “vitamin” that never changes in appearance. The only redeeming aspect of the game would be plenty of different game variations, but there are only eight, simply changing the speed at which the Pac-Man and the the ghosts move. There IS a two-player mode included by Frye, which eats away at what little memory he has to work with. As for sound, there is a grating three-note starting sound, the incessant clang-clang-clang as the Pac gums the rectangle “dots” to death, and the flat-as-a-pancake death sound.

Tod Frye, creator of Atari Pac-Man for the 2600 video game console

Pac-Man perpetrator Tod Frye at development console, undated photo

Atari Pac-Man magazine cover

She’s really white-knuckling that joystick! Atari’s flaccid Pac-Man on cover of Playboy’s Electronic Entertainment magazine, Spring/Summer 1982

It is painfully apparent that the game is a rushed job, pushed out in order to recoup the money paid by Atari to Namco for the Pac-Man license. You can’t lay total blame at the feet of game programmer Frye, though: he is ensconced in a room by himself to code for the short four-month deadline, and is further constrained by a demand from Atari to use the cheaper 4K cartridges for his game as opposed to the larger 8K memory of products like Asteroids.  Thus, his resultant game is heralded as a technical achievement by fellow programmers. However, it also helps spawn an edict at Atari that all following games be assigned the more roomier 8K chips. Despite its limited memory, upon release home Pac-Man is a big hit, eventually hitting nine million cartridges bought by retailers. With a 10 cent royalty on every copy sold, Frye’s sales-based bonus results in a paycheque approaching a million dollars, which he cockily staples to his office door…after cashing it, of course. Better versions of Pac-Man are eventually released for other platforms like Atari’s own 400/800 computers and the 5200 Supersystem, as well as other manufacturers’ game platforms like the Commodore 64. Atari itself is eventually redeemed with the vastly improved Ms. Pac-Man on 2600. This adaptation is properly allocated an 8K ROM to allow for a reasonable proximity of the arcade game after the first Pac-Man debacle, and given a six month timeline and a three-person development team. Ms. Pac-Man’s release date is also appropriate: Valentine’s Day of 1983, and the game is a top video-game seller for the year.

Click to play Ms. Pac-Man on the Atari 2600

The original home version however, is an undeniable creative stumble by Atari, and no other game better demonstrates how overwhelmed the 2600 is graphically by emerging systems than Frye’s Pac-Man. Accompanying the game’s release is a massive backlash from critics and users alike, users who have had a cold splash of reality thrown in their face about just how obsolete the VCS has now become. There is a massive amount of returns of the cartridge back to stores by disappointed players, which gives pause to retailers when it comes time to place other game orders from Atari. Games like the mystical SwordQuest series, developed by Frye and accompanied by a contest to give away jewelled treasures worth thousands… and ended unceremoniously when the video game industry goes belly up. Also ending is Frye’s fortune, pissed away within three years via extravagant spending and an equally extravagant tax bill. He would later go on to make games for Midway and 3DO.

Ray’s Revenge with Yar’s Revenge

Yar's Revenge, a video game for the Atari 2600 console

Yar’s Revenge, a video game for the Atari 2600 console

oOf course, not every game released by the company of this era is an undercooked turkey, as shown by the marvellous Yars’ Revenge, released in May of 1982. The game is originally conceived as a port of Cinematronics’ hit vector arcade game Star Castle until the licensing deal falls through. The designer of Atari’s version is Howard Scott Warshaw, creator of some of the more complicated 2600 games, including Raiders of the Lost Ark as well as The A-Team, a game which itself had started out being called called Saboteur until a giant Mr. T head graphic added and the name of the hit early 80’s TV show is slapped on the cartridge. Warshaw juggles the play mechanics of the now-license-less Star Castle port around a bit under the working title Time Freeze, and the resultant Yars’ Revenge becomes one of the most original and involving games in the 2600 library. The title character’s name, and the solar system he’s fighting to save called ‘Razak’, are all references to Ray Kassar, Atari president, terms chosen by Warshaw to cement the game’s success in the Atari pipeline. This, as well as a 12-page comic to be included in the game, considered by Warshaw as the first complete backstory for a video game.

Yars' Revenge comic book by the Atari video game company

A page from Yars’ Revenge: The Qotile Ultimatum, comic included with Yars’ Revenge, 1982

To herald the release of Yar, as well as promote 2600 games Asteroids and Star Raiders, Atari commissions an impressive two-minute commercial, titled The Fly, featuring state-of-the-art CGI by Robert Abel and Associates, who also do CGI work on the groundbreaking Disney film Tronreleased the same year as the commercial. Made to run in theatres over the summer of 1982, the ad features actor Rod Davidson sitting in an office chair with his back to the audience, posing as an Atari game designer brainstorming ideas, which manifest themselves as computerized images zooming and swirling around him. Designer-director Clark Anderson and co-director and technical expert John Hughes of Abel first design the commercial as an animatic on an Evans and Sutherland Picture System II computer graphics terminal, the animatic being a B&W wireframe version that is the equivalent of the pencil test in traditional animation. The wireframe design is then filled in with tightly-packed smaller lines, and filters are used between the output video screen and the 35mm camera recording it on film to add colour fill to the images. Actor Davidson is filmed in front of a blue screen, acting against the animatic hidden on a video screen in front of him. Computerized lighting cues expose the actor to the various lighting effects synced to the colourful video game elements; there are 80 different lighting events over the two-minute commercial. Live action, CGI and other VFX elements are then matted together, to make an ad that startles moviegoers in 1982.

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Comments >>

  1. avatarJacko

    Nice article but ACCURACY COUNTS: “By the end of 1984 things come to a crashing halt, with every major videogame system up to that point either being sold to independents or discontinued altogether.” is incorrect; the Colecovision was discontinued in 1985.

    1. avatarWilliam

      Hi, thanks so much for reading the article and pointing out this error in it. I have re-worded the section in question to better reflect the year range I’m describing. Thanks again for helping make the site better!

  2. avatarMatthew

    Grabbing a handful of loose cartridge out of a 55 gallon drum and paying $10, thinking there might be one good game in the bunch. Never actually trying all of them, and missing the fact that two of them were really good games.

  3. avatarmm

    Console sales numbers are not quite right. If it’s total sales through mid 1982, 12M Atari and 1.5M coleco vision might be okay but Intellivisions should be about 2.5 million.

    There’s no evidence that any Atari 7800 were sold in 1984.

  4. avatarThomas

    Hello, I’m currently writing a paper on the topic of the Atari video game crash. I was wondering if you wouldn’t mind emailing me some of your sources/information regarding this topic? I definitely enjoy researching this idea, but there does not seem to be enough information online for me to write an effective paper.

    Thank you.

    1. avatarWilliam

      You can find all the sources at the bottom of the final page of the article, by clicking the Sources tab. Glad you find the site useful, and I wouldn’t mind reading your paper when it’s finished.

  5. avatarSawdust

    Enjoying reading your video game history. What is the “one special exception” mentioned in the shutdown of Atari game development?


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