The Video Game Crash of 1983

By now you have heard me mention the Video Game Crash of 1983 in almost all of my blogs. It just occurred to me that I really never explained what it was. So here we go, an expedition into the past.

Imagine, if you will, that you have 3 tv channels. Duran Duran was on the radio, Michael J. Fox became Alex P. Keaton. Ronald Reagan was in the White House, Nancy was leaping around the country telling kids to JUST SAY NO, and video games were in their golden age.

Only, by this time, the golden age had tarnished (YES, I know gold doesn’t tarnish but just go with the analogy.) The industry dominant Atari 2600 was 6 years old, and 30 million people had one. Arcades were the place to be and everyone was jumping on the home video game bandwagon, hoping to score some quick bucks.

This led to a massive oversaturation of the market. At the time, if you were in the market for a new video game system you could choose between the Atari 2600, the new Atari 5200, the ColecoVision, the Arcadia, Fairchild Channel F, Magnavox Odyssey, Mattel Intellivision, and a handful of others, not to mention the clones of those systems released by big box stores like Sears and RadioShack. Some of these systems were awesome and are worthy of buying even 30 years later, others just outright sucked.

Of course when you have such a glut of video game systems you get a glut of video game cartridges. Back then there were no controls on third party software development and EVERYONE jumped on the bandwagon trying to make a quick buck with hastily released, unplayable games. Even Purina and General Mills were making games. There were so many sucky games out there, that a lot of people were starting to dread buying a new one, not knowing if they would like it. Some extremely high profile games, including Pac-Man and E.T. The Extraterrestrial both for the Atari 2600, were such horrible titles that more copies were either unsold or returned than were actually retained by customers.

In fact, there is a conspiracy theory rumor about E.T. for the Atari 2600. As rumor has it, MILLIONS of unsold copies of E.T. were removed from Atari’s El Paso warehouse and taken to Alamogordo, New Mexico where they were quietly crushed and buried. This attempt to rid Atari of it’s huge embarrassing failure was picked up on by the local paper, and a few days later by the New York Times. The next day, concrete was poured over the site.

These public failures led to a drop in consumer confidence in the entire industry. Retailers were just as sick of their customers returning sucky games as the video game companies were of receiving tons of unsold copies back from the retailers. So what did the retailers do? Well the principals of capitalism took over and they simply stopped stocking their shelves with things that were more of a headache than a source of income. Sales industry wide fell from about $3 billion in 1982 to around $100 million in 1985.

So, without anyone to sell their junk games and glut of systems, the system and game manufacturers began hemorrhaging faster than one of Jason’s machete slashed victims.  The software giant Activision took a HUGE hit and switched over to developing games for personal computers. Game developers such as Games by Apollo and US Games quickly went out of business.

On the hardware side, Magnavox gave up on video games and went back to making TVs and VCRs. Coleco also got out of the business, but wouldn’t be as lucky as Magnavox. They filed for bankruptcy in 1988 and their assets were bought by Mattel the following year. Even the almighty Atari was not immune to the huge downturn in the market. After booking massive losses, Warner Communications sold Atari to Jack Tramiel in 1984.

So why do we have video games at all anymore? One word: Nintendo. First off, Nintendo knew that it would be hard just to get on toy store shelves. So what did they do? They made their system look more like a VCR than a video game system. They also initially packaged their deluxe system with R.O.B. (Robotic Operating Buddy), a robot that played a total of two games. Once the Nintendo took off, ROB was discontinued. Nintendo also kept strict control on it’s software, with an innovative lock-out chip that would only play Nintendo approved games.

The Nintendo flew off the shelves. Video games were back with a vengeance. Atari jumped back into the fray, re-releasing 1984’s Atari 7800. But it was to to little to late. Atari didn’t give the 7800 any financial backing, advertising or attention. The 7800 did have the advantage of near 100% backward compatibility with the 2600. Of course, all this meant was that you could play games that, at the time, were between 3 and 10 years old. The 7800’s own library of games was rather good, but extremely limited, mainly due to exclusivity agreements between game developers and the great Nintendo. Atari kept making game systems until the Jaguar in the mid-90’s, but without much commercial success.

This spelled the end of American dominance in the video game market, and the rise of Japanese companies with such everyday names as Nindendo, Sega and Sony. The United States would not produce another successful game system until the 2001 introduction of the Microsoft Xbox, and even that is made in China.

ON A DIFFERENT NOTE: Don’t forget to vote for your favorite game system on the poll located on the top of the column on the right! A lot of people have voted for the SNES, which is probably my least favorite vintage system and I really don’t think it did much to further the video game industry, but one man’s trash is another’s treasure. Anyway, VOTE! PLEASE VOTE!