If you ask co-founder Nolan Bushnell, the main reason for Atari’s ultimate failure in 1983-1984, a failure so dramatic that it helped drag an entire industry down with it, was sowed back in ’78. That was the year he left the company, and new CEO Ray Kassar changed Atari’s focus from innovating in the video game space to marketing what they had already had. Sure, in the short term this strategy might have aided in Atari becoming the fastest growing company in American history, but it left the video game giant on a foundation of sand as the technology of video games and the tastes of players progressed through the years. Nothing quite crystallizes this attitude of marketing over innovation so much as the story of how the first third-party game maker for the VCS, Activision, was born. The story continues in the TDE Bitstory archive:

One day in 1979, [David] Crane finds himself intently analyzing 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.  Knowing 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.

Activision went on to great success, producing hits like Pitfall! and Keystone Kapers for the 2600, as well as cartridges for Mattel’s Intellivision.  Their pivot in 1983 to games for the home computers of the era allowed them to weather the storm of the Great Video Game Crash of 1983-84, and today remain as one of the largest video game companies around.

For more history of Activision and the Atari VCS/2600, consult your local Dot Eaters article.