In 1982, Atari could do no wrong. Its 2600 game console outsold its most successful competitor 10 to 1. But its followup, the Atari 5200, flopped. Here’s why the Atari 5200 failed.
Atari had all of the ingredients it needed for success, but it didn’t put them together. This opened the door for other companies, including Nintendo.
The Atari 5200’s technology
The key people behind the design of the Atari 2600, including Jay Miner, had left for other companies long before 1982. But before Jay Miner and others left, they designed a home computer architecture, which Atari released as the 400 and 800, and then evolved into the XL and XE series. The technology was far too expensive to use in game consoles in the 1970s, but by 1982, that had changed. Atari reused the chips from the 400/800 series in the 5200, but missed pretty much every potential opportunity that provided.
It seems Atari relied on its name to carry the day with this wave of consoles. And that didn’t work out so well for them.
The Atari 5200’s failure
There are no fewer than six reasons why the Atari 5200 failed. Five of them were things Atari could control directly. The fifth, the video game crash of 1983, wasn’t something Atari could anticipate or control, though Atari’s decisions contributed to it.
Other consoles proved Atari wouldn’t have had to get all of these factors right in order to have succeeded. Coleco tried on four of the five, and even with poor execution, did relatively well. Sometimes Nintendo got away with just one. So here are the four things Atari could have done differently to avoid the Atari 5200’s failure.
Lack of compatibility
Atari didn’t make the 5200 backward compatible with the Atari 2600. That meant you couldn’t play your old games on the 5200 if you upgraded. This would have added cost, but in hindsight, it was a misstep. Atari eventually released a 2600 compatibility module for the 5200, but that should have been available much earlier, either as an add-on or built-in. Both of Atari’s competitors had such a module available, and they had it before Atari. This encouraged someone looking to upgrade from a 2600 to upgrade to an Atari competitor instead.
Atari also didn’t make the 5200 compatible with Atari’s home computer software. This would have been easy to do since they used the same CPU and chipset, but Atari deliberately chose not to. This meant the 400 or so game cartridges that were available for the 400/800 weren’t compatible without changes. Some publishers made the change, but not most. Atari could have given its console the second largest library of available game cartridges on day one, but left that opportunity on the table. Sure, some of those cartridges required a keyboard, but that was an opportunity for a lucrative upsell.
Lack of upgradability
Atari didn’t provide an option to upgrade the 5200 to a home computer, even though the 5200 was based on its computer technology. When Coleco released its competing console, it promised the ability to upgrade it to a full-blown home computer. In 1982, consumers didn’t necessarily buy both a game console and a computer. They were more likely to buy just one or the other.
Having the ability to buy a game console and then cheaply turn it into a home computer turned out to be a passing fad. But in 1982 it gave Coleco an advantage, and they cashed it in. Coleco’s home computer was full of problems, but it still helped Coleco outsell the Atari 5200 by a margin of 2:1 during both consoles’ brief time on the market.
If Atari had done a well-executed upgrade option, the Colecovision would have been a fair fight. Instead, the Colecovision became a moderate success while the Atari 5200 failed.
Atari, Coleco and Mattel all struggled with controllers during this era. They wanted to get beyond a joystick with a single button so you could play more complex games, but none of them had a good answer in 1982. It was Nintendo who would come along with a good answer in 1986 with its gamepads. Nintendo’s pads weren’t perfect either, but they were better than the 5200’s non-centering analog controller. The 5200’s controller worked really well for a handful of games but it was very awkward for others, including popular games of the time like Pac-Man.
The launch title
Both Atari and Coleco touted this wave of consoles as being arcade quality. But while Coleco packed its console with Donkey Kong, Atari included Super Breakout. A more up-to-date title would have been a much better choice. Atari switched to Pac Man later on, but too late. I think Atari got greedy, figuring consumers would buy the other titles right away, and it burned them.
Nintendo’s use of a strong launch title, Super Mario World, was a big reason it was able to get away with lack of backward compatibility with the Super Nintendo. Nintendo proved you don’t have to get everything right in order to be successful. But you have to give consumers more than Atari gave them with the 5200, and that’s why the Super Nintendo succeeded while the Atari 5200 failed, and why Nintendo built a much better track record of following up on previous successes than Atari.
Finally, the Coleco Vision console tended so sell for around $20 less than the 5200, even though it had the advantage of a bigger software library and better expandability. Even though they retailed for the same price, stores like Children’s Palace, sold the Coleco Vision for $179 and the Atari 5200 for $199 in 1982.
In 1982, that price difference was more significant than today–that’s $50 in 2018 dollars. Realistically, these consoles targeted the higher end of the market, so $20 wouldn’t be a dealbreaker. But given the choice between buying a 5200 with the aforementioned problems, or buying a Coleco Vision and then putting the $20 toward another game or accessory, the numbers tell us that more often than not, consumers went with Coleco.
Atari slashed the price for Christmas 1983, but by then it was too late. Sears sold the 5200 for $199 in the spring of 1983 and cut it to $119 after rebate for Christmas, but even with the lower price and Atari 2600 compatibility as an option, Coleco still had the bigger library of titles and the ability to expand. The 40% price cut looked like an act of desperation, which it was.
The crash of 1983
The 5200’s biggest problem had little to do with the 5200. In 1983, consumers just quit buying video games. This was due to a combination of factors, including low-quality Atari 2600 titles and relentless advertising from Commodore saying its VIC-20 and C-64 computers were a better buy in the long run. Coleco’s ability to upgrade its console combated that to a degree, but the 5200 didn’t have the option.
As a result, Atari went from accounting for 1/3 of its parent company’s revenue to losing $500 million. When Warner sold Atari to Commodore founder Jack Tramiel, the game consoles quickly became a casualty. Tramiel shifted Atari’s focus to the 68000-based Atari ST computer, only paying attention to the video game market after it recovered. Even then, the 5200 wasn’t part of Atari’s plans.
Atari did release the XE Game System in 1987, which was basically the console the 5200 should have been because it was compatible with Atari’s 8-bit computers. But by 1987, Nintendo’s momentum was too much to overcome. Nintendo had the titles that captured consumers’ imagination, and while I remember my classmates being excited about the XE Game System when it came out, no one I knew bought one. Atari’s system couldn’t play Legend of Zelda, so all that talk didn’t translate into purchases. Had Atari released an XEGS-like 5200 in 1982, it probably would have fared better.
Hindsight on the Atari 5200’s failure
In Atari’s defense, other companies struggled to understand the importance of backward compatibility in 1982 too. And Commodore’s success with its home computers in 1982 caught other companies off guard, not just Atari. I think greed got in the way of Atari including a must-have title in the box with the 5200, and that hurt. So did not making the 5200 compatible with Atari’s own home computers. That reportedly was due to infighting between Atari’s internal divisions. That lost opportunity came back to bite them, and that was Atari’s first step toward its current state as essentially an undead brand.
The Atari 5200 is a collector’s item today because of its role in Atari’s fate, and you can usually find quite a few of them on Ebay. A beat-up, untested console isn’t worth a lot, but a tested console in nice condition usually sells for over $50. Bundled with a few games, it can sell for over $100.
With 69 titles, the 5200 provides a challenge for collectors, but a more attainable challenge than trying to accumulate every Atari 2600 or Nintendo NES title.