How they got there was mostly a misunderstanding of the nascent business. E.T. was the blockbuster movie of 1982. And Atari videogame consoles were a national craze. The two had the potential to be an explosive combination. But Atari flubbed the opportunity, releasing a game that was nearly impossible to play. Everyone I knew bought a copy–though probably not at the original full retail price–and nobody I knew liked it, nobody I knew could play it, and it wasn’t long before the Atari was relegated from the living room TV to the basement TV, on its way to the closet.
But E.T. was more of a symptom than a cause. It was probably Atari’s biggest mistake, and that’s why it gets attention. Atari was vulnerable and probably didn’t realize it until it was too late.
Atari was overconfident and they made more cartridges than there were existing Atari 2600 consoles to play them. Its executives believed consumers would like the game so much they would buy more than one copy–I can only speculate that they thought cartridges wore out like vinyl records. Remember, at the time Atari was owned by Warner Bros., a record company. There were multiple problems with that statement–kids didn’t like the game and the game didn’t wear out. But in the light of the fact that Atari was owned at the time by a record company, the reasoning makes a little more sense.
But why did the bubble burst? It wasn’t just E.T. There were some terrific games for the 2600, but by 1983, it seemed like there were more bad games being released than good ones. The two most often held up as disappointments, E.T. and Pac-Man, both ran up against the limits of a machine that was never intended to play those types of games and struggled under the complexity. When you rush a tough job, it might not end well, and in this case, it didn’t.
To put things in modern perspective, imagine the PS2 still being on the market today, and developers trying to develop PS4-like games on it. It could be done, but the large number of compromises won’t make many people happy.
Atari may not have realized it was vulnerable, but its competitors did. Commodore ran advertisements featuring William Shatner, directly asking, “Why buy just a video game?” The VIC-20 that Shatner was pitching was also woefully underpowered, but it could play slightly more complex games than the 2600, and it didn’t hurt that you could do your homework on it. Commodore sold a million VIC-20s in 1982. Late that year, they introduced the machine’s successor, the 64, and in 1983, while Atari was burying inventory, Commodore couldn’t keep up with demand.
Atari had a sales pitch that said, “Have you played Atari today?” and as 1983 wore on, the answer more and more frequently became “no.” Atari made computers too, but it was Commodore, Apple, and Tandy that got the lion’s share of 1980s home computer sales. Don’t get me wrong. We didn’t all wake up on January 1, 1983 and move the Atari to the basement. Some people didn’t move theirs until 1984, even. It was more a matter of people noticing they weren’t playing as much, so they’d move it to free up space in the living room. Or maybe they got a VCR and didn’t know you could connect both of them to the same TV, so they moved the Atari to make room for the VCR, since they would use it more. If you bought a computer and a VCR, that aging Atari became the odd one out.
As 1983 wore on, Atari games landed in discount bins in stores like Kay Bee, or sat in warehouses for years. Atari was losing money, so that was why they buried a bunch of unmovable inventory in a New Mexico landfill to get Warner quick tax writeoff. That was the stuff they found this past weekend.
I was still finding Atari 2600 cartridges, new in shrinkwrap, in closeout stores in the mid 1990s, so burying that inventory in 1983 probably wasn’t a bad idea.
In July 1984 Warner sold Atari off to Commodore founder Jack Tramiel, who had been ousted from the company he founded. This was convenient for both parties–it got Warner out of a business they didn’t understand, and it gave Tramiel a chance to keep selling computers. As his Commodore ad campaigns suggested, Tramiel was more interested in selling computers than video games, so Atari never really learned the lessons of E.T.
Someone else did, though. In 1983, Atari and Nintendo were negotiating to develop a next-generation game console together. The deal never came through, though, so Nintendo continued on alone. Nintendo applied those lessons to big success in late 1985 with its first console and the Super Mario Bros. franchise.
Atari re-entered the video game market in the late 1980s but never duplicated its early success. Nintendo, of course, is still selling consoles 29 years later.