The Gaming Historian - The Video Game Crash of 1983

The video game industry is booming these days. Some games are rivaling hollywood movies in terms of sales, and the technology is beyond what anyone would have imagined 10 years ago. But back in 1983, an event happened that would change the video game industry forever. Poorly made games, a ton of systems to choose from, superior technology, media frenzy! What happened to the industry back in 1983? It crashed. Now, I try not to bore you guys when I do these shows, so I'm not going to be going into financial details about the stock market and company sales figures and what not. Hopefully, by the end of this episode, you will know the main reasons why there was a crash.

Let's start with the first reason. Poorly made games. Pac Man is easily one of the most successful arcade games of all time, and according to a recent survey, the most recognized video game character of all time. After its release in the United States in 1980, Atari obtained the license to port the game to its Atari 2600. Around this time, there was about 10 million Atari's in US households. With this data, Atari decided to manufacture 12 million copies of the game. Atari was so confident with their game, they made MORE games than there were consoles, hoping consumers would buy an Atari JUST TO PLAY PAC MAN. Todd Frye, a leading programmer at Atari, was asked to do the port. Frye eventually showed them a prototype of the game. Rather than miss the approaching 1981 holiday season, Atari PUBLISHED THE PROTOTYPE. It was a disaster. The game barely resembled the original, and consumers were upset, many asked for refunds. Overall, about 7 million Pac Man cartridges were sold. Todd Frye was given a royalty on every copy sold, so it didn't matter if the game was bad or not, he made a huge sum of money. But Atari had to accept the losses with the extra 5 million unsold.

Another disaster was E.T. E.T. was released on June 11th, 1982 in movie theaters. It was a big success, and soon it was licensed to become a video game. Steven Ross, head of Warner Communications (which owned Atari), told Ray Kassar, CEO of Atari, that he wanted the game out by Christmas. The game was a disaster and to this day it is still considered one of the worst video games of all time. About 5 million cartridges were produced, and almost all of them came back to Atari. With millions of unsold cartridges sitting in an Atari warehouse, Atari dumped them in a New Mexico landfill, steamrolled them, then poured cement over top. Atari had lost 536 million dollars by the end of 1983.

These two games really made consumers lose ALOT of confidence in the video game industry. That's not to say there were other bad games. Believe me, there were alot. For instance, if you sent in proofs of purchase of Purina dog food bags, you could get a copy of Chase the Chuck Wagon. That's right, dog food companies had video games. There was a flood of games being released during this time, and many stores could not even keep up, let alone have enough shelf space for them all. Console games went from being 30-40 dollars to about 4 dollars in a bargain bin during the crash.

Let's take a look at another reason for the Video Game Crash of 83; too many consoles. In todays time, we have 3 home consoles competing against each other: The Xbox 360, the PS3, and the Nintendo Wii. Well, back in the early 80's, you had dozens of consoles competing against each other. Atari 2600, Atari 5200, Colecovision, Intellivision, Coleco Gemini, Vectrex, Magnavox Odyssey II, Fairchild Channel F System, Emerson Arcadia 2001, I could keep going. Not only that, but some of these consoles had interchangable software. For example, the Colecovision had an expansion module that would allow you to play Atari 2600 games. Can you imagine if that happened today? What if Sony announced a device that would allow 360 games to be played on the PS3? Since the Atari 2600 could be reproduced with standard parts, this was legal. Coleco also released the Coleco Gemini, which is basically an Atari 2600 clone. The US Market was flooded with consoles, and consumers had way too many choices and not enough information.

This brings me to my next reason for the Video Game Crash of 1983. Loss of publishing control. Activision was the first third party publisher of video games. Because Atari would not credit their game designers, several programmers from Atari left and founded Activision. Many noticed this, and soon tons of developers and publishers began making their games and putting them on shelves. See how this might go wrong? Today, all games for consoles are controlled by the console manufacturer. You won't find an xbox 360 game without this logo on top. When the manufacturer loses control of this, the market is flooded. This is exactly what happened. They were everywhere. You know Columbia House, the company that sends you flyers in the mail that offer 5 dvd's for 49 cent each? They formed the Columbia Cartridge Club to sell video games. Some companies even experimented sending games through cable television! Regardless, this flood of games was just bad for the industry.

Today, we rely on computers for just about everything. Internet, news, even this video. Well during the early 80's, personal computer were first being put into american households, and guess what? They contributed to the crash. During the 70's, a computer would run easily over 1,000 dollars. But by the early 80's, they had come down in price. Computers offered not only superior graphics and sound, but also other uses such as word processing and accounting. Many consumers felt that owning a computer was a strictly better investment than a console. Computers were also much more widely distributed. PC's such as the Commodore, the Atari 400, Atari 800, and the Radio Shack Color Computer were all technologically superior to consoles and were competitively priced as well.

So what happened as a result of all of these events? Consumers lost confidence in the industry, and business analysts saw no long term future for the business. The industry came to a sudden halt in 1983 and would last for 2 years. Now keep in mind, this was bad mostly for the businesses. Due to the crash, all of the consoles and games were marked down to bargain bin deals, and this was good for consumers. Even though arcades were beginning their downfall, they were still popular. Thus many people don't even KNOW about the Video Game Crash of 1983. The Video Game Crash was primarily bad for the industry, not the consumer.

The North American Video Game Crash of 1983 did have some long term effects. Starting with the Nintendo, new measures were taken to control third party development. One example would be the lockout chip in the Nintendo Entertainment System. The most important change however, was the shift of the video game market from the United States to Japan. Even today, Japan has a majority control over the home video game market. Atari never fully recovered from the crash. Warner Communications sold the company soon after, and when Atari tried to reenter the market, they found themselves far behind Sega and Nintendo. Atari called it quits on hardware after the Jaguar failed. Many other companies such as Mattel and Coleco simply abandoned the video game market.

It was not until 1985 with the release of the Nintendo Entertainment System that the industry would recover.