Last Updated on April 3, 2024 by Dave Farquhar
Atarisoft was a short-lived publishing venture from Atari, makers of the iconic 2600 game console and 800/XE/XL line of 8-bit computers. As consumer interest shifted from game consoles to computers, Atari sought to bolster its fortunes by publishing software for those computers. The results were mixed.
Atarisoft allowed Atari to make some short-term profits, but in the long run it may have hurt sales of their own computers. The titles Atarisoft published had been exclusive to Atari systems, so publishing them for other systems robbed Atari of system exclusives.
Why Atari got into software publishing
Atari, of course, published its own software titles for its game consoles and computers. In the 70s, that was how you did it. All software on game consoles was first-party at first. And Atari followed the same model when it released its computer line.
Atari accidentally invented third-party publishers. At Atari, there was no such thing as a superstar game developer. Atari expected its programmers to be anonymous, and it paid them a straight salary, with no royalties on sales. There wasn’t a whole lot of reward for writing a huge hit. David Crane noted his games made Atari $20 million, but he only received a modest $20,000 salary.
Crane and three other top Atari developers left and founded Activision, the first third-party game developer. Activision produced a string of titles for the 2600 that pushed the system’s limits and became classics. If you played Atari games in your youth, there’s a good chance Activision published several of your favorites.
This was good for Atari, because the Activision titles really extended the life of the console by several years. But Atari didn’t like that it didn’t receive any royalties from Activision’s sales. Atari sued. When it became clear Atari couldn’t block Activision, they settled, with Activision paying Atari a small royalty.
This incident legitimized the concept of third-party publishers as a business model.
Atarisoft: The antidote of the video game crash of 1983
By 1983, Atari was losing mindshare to inexpensive computers at an alarming rate. Atari went from being the market leader of a $2 billion business in 1982 to losing half a billion dollars in 1983. Home computers had more memory than Atari’s game consoles, and most of them had better graphics capabilities. Or at least they had better graphics capabilities than the 2600. So they could play better games than the 2600, in addition to doing more serious work like word processing.
Atari wasn’t benefiting much from this boom. Commodore sold about as many computers in 1983 alone as the Atari 8-bit computer line sold in its entire lifespan. And while 1983 was the year TI gave up, it wasn’t for lack of sales. TI sold 2.8 million computers, but lost money on most of the sales.
No single computer could challenge the Atari 2600’s install base, but collectively, if you added up the install base of the most popular 6-8 platforms in North America and Europe, the numbers were getting close, and with no signs of slowing down.
Activision proved you could make money selling software, and Atari had exclusive rights to a couple dozen popular arcade games. Atari decided to try its hand at selling software like Activision.
Atarisoft’s business model
Lacking the developers it needed to program for non-Atari machines in house, Atari contracted with outside developers to port its titles, which Atari would then publish and distribute. By Christmas 1983, Atari had a library of about 20 titles available for every major platform, including rival game consoles from Coleco and Mattel, and even the business-oriented IBM PC. Atarisoft wasn’t necessarily the first company to publish games for the IBM PC, but it was publishing games for the PC long before it was common.
Atarisoft saved Christmas for Atari in 1983. While sales of 2600 consoles dropped off, consumers scooped up Atarisoft titles like Pac-Man for whatever computers or consoles they were buying. Donkey Kong had been a huge hit for Coleco in December 1982, in spite of its shortcomings, but Atari had the rights to computer versions, so the Atari version of Donkey Kong for home computers gave Atari a boost a year later. While the year was disappointing overall, the software proved a bright spot.
By mid-1984, Atarisoft had an additional six titles available for most of its platforms either in the works or on store shelves, a combination of newer arcade hits, a game based on the hit movie Gremlins, and an educational title. But a shift in Atari’s overall business model meant the end for Atarisoft.
Jack Tramiel and the end of Atarisoft
Warner Communications, Atari’s parent company, was losing patience with Atari’s turnaround efforts and wanted out. And the timing was just right. There was an eager buyer looking for a computer manufacturer to buy, if they could make the money work.
In the summer of 1984, Jack Tramiel, the exiled founder of Commodore, purchased Atari’s consumer business from Warner Communications for $75 million. Tramiel wasn’t interested in publishing games or producing game consoles. He wanted to build a next-generation 68000-based computer to compete with Apple’s Macintosh. To him, Atari was just a vehicle for that. He hired a few loyalists from Commodore, teamed them up with remaining Atari engineers, and they rushed a machine to market. Tramiel went from looking for a company to buy to having a product on the market in about a year.
While Tramiel didn’t pull the plug on Atarisoft right away, he phased it out rapidly. Titles in development got cancelled if they weren’t ready to go. This was one reason for the unevenness in certain Atarisoft releases. Joust for the C-64 was cancelled, though it did appear on the Apple II and IBM PC.
Was Atarisoft a mistake?
It was hard to argue in 1983 with Atarisoft’s success. There were even rumors at the time that Atari would pull a Sega, abandon hardware entirely, and become a software publisher. Of course, today we know the outcome, so we have perspective Atari management lacked in 1983.
Short-term, Atarisoft gave Atari a much-needed shot in the arm. Atari needed revenue, and publishing titles for non-Atari systems was the easiest way to get it. Knockoffs of Atari titles were popular on Commodore and TI systems, so Atari guessed correctly that officially licensed versions would be too.
The long view
I don’t think it was as good in the long term. In 1983, everyone thought the 68000 generation was right around the corner and would take over right away. As it turned out, 32-bit computing took longer than expected to go mainstream. Much longer. Old-fashioned 8-bit computers had a lot more life in them than anyone thought.
Atarisoft’s conversions for computers like the C-64 were much better, in many cases, than Atari’s versions for its own computers. The Atari 800 could hold its own with a C-64, but looking at Atari’s implementation of Dig Dug and Mario Bros. next to the C-64 implementations, you wouldn’t conclude that. The graphics were more crude and the gameplay wasn’t as faithful to the original on the Atari.
Atarisoft gave the C-64 a nice shot in the arm in 1983 and the C-64 rode that wave another 10 years. The Atari 800 morphed into the XL and XE but ran out of gas around 1988. If you had to buy an Atari computer to play the official Pac-Man and the other 24 titles in Atarisoft’s catalog rather than knockoffs, that could have only helped Atari computer sales. The Atari 2600 had the largest library of its generation, and Atari hardware never enjoyed that advantage again.
Nintendo proved platform exclusives are beneficial. It kept the Mario franchise exclusive except for a couple of very notable and rare exceptions. Zelda stayed exclusive. Of course, we know these things because Nintendo studied Atari very closely when it made its decisions, then tried the opposite.
Ultimately the bigger problem is Atari gave up its exclusives, then only got one Christmas season’s sales out of them. So ceding its competitive advantage in 8-bit computers gave it nothing to show for it in the end.
The legacy
The Atarisoft catalog took on a second life in the second half of the decade, being republished by budget publishers like Thunder Mountain. I was certainly glad to play those games, as they were generally good conversions of titles we already regarded as classics.
And ultimately, Atari did do what that rumor predicted in 1983. Today, Atari is a software company. The transition just took a couple of decades longer than expected.
Sealed Atarisoft games are more common for platforms like the Apple II and IBM PC than for home computers, which suggests those titles didn’t sell as well. The relative ease of finding even sealed copies for the C-64 suggests Atari may have overproduced, but Atari also spent the first half of 1984 pumping the sales channel full of inventory and then cut off advertising suddenly at mid-year due to the change in ownership.
Whether you collect them or just play them, the Atarisoft titles are a fun relic of the industry circa 1983.
David Farquhar is a computer security professional, entrepreneur, and author. He started his career as a part-time computer technician in 1994, worked his way up to system administrator by 1997, and has specialized in vulnerability management since 2013. He invests in real estate on the side and his hobbies include O gauge trains, baseball cards, and retro computers and video games. A University of Missouri graduate, he holds CISSP and Security+ certifications. He lives in St. Louis with his family.