Pixels to pitfalls: how Atari lost its grip on the gaming industry

The humble beginning of video games as we know them today comes from the development of a home video game system called Atari 2600. Atari might not have been the first to develop a home video console, but it was certainly the one to change the game. Suddenly, people were exposed to better quality images, brighter colours, and clearer sounds all from the comfort of their homes. Atari was the first system that allowed the public to bring the arcade home, connect it to their television sets, and change games whenever they liked, just by inserting different cartridges.  

Atari faced serious competition from the Magnavox Odyssey, which played 12 different games on your television. While Atari was extremely popular for games like Pong, you could only find these games in the arcade. However, Atari started the new era of the home gaming system with the introduction of Atari 2600. The video game console came with two joysticks, two paddle controllers, and one game cartridge. But the most notable development brought forth by Atari 2600, previously known as Atari VCS, was the microprocessor-based hardware and swappable ROM cartridges. While Atari’s first major production was the Pong home console, its fame grew exponentially with the introduction of the home version of Space Invaders. Around 1978, Atari began to struggle desperately due to the competition it faced from Mattel Electronics and Magnavox Odyssey. This forced Nolan Bushnell, Developer of the Atari VCS, to receive financial support from Warner Communications. The arcade conversion for a home console of Taito’s Space Invaders turned out to be Atari’s saving grace. It helped to double the sales for the next two years. By 1982, the introduction of Pac-Man ensured that Atari had roughly 10 million console sales, with 8 million copies of Pac Man sold by 1990.  

The video game crash of 1983 was one of the most notable recessions of the video game industry, primarily in the United States.

In 1982, Atari launched their second home video console named Atari 5200, which meant renaming Atari VCS to Atari 2600 in an attempt to standardise naming. This was also the time when Atari was facing a significant threat of hardware domination from ColecoVision. While they attempted to maintain superiority by selling 7 million copies of Pac-Man, the game still had technical issues and design flaws. To stay in the loop of the widely competitive market, Atari developed E.T. the Extra-Terrestrial in six weeks. While the game sold arguably well due to its introduction in the holiday season, it didn’t live up to the expectations that were set for it by Atari and Warner Communications. This started a cycle of decline for Atari. Warner Communications reported a stunted growth of 10-15%, as opposed to the expected 50% growth. Investors and shareholders began to lose faith and started to pull out funds from the gaming system. As time went on, the disastrous effects began to be felt all over the market, causing the video game crash of 1983.  

The video game crash of 1983 was one of the most notable recessions of the video game industry, primarily in the United States. One of the primary reasons for this disastrous outcome was the overload of home video game consoles in the market and the poor quality of games that they offered. There was also a loss of interest in gaming consoles with the introduction of personal computers. Home video game sales fell from 3.2 billion to 100 million, and it came with the bankruptcy of several gaming companies including Atari Inc., thus ending the golden age of arcade video games.  

The effects of this crash were significant. However, there were two positive outputs. Firstly, it led to the success of the Nintendo Entertainment System which was released in October 1985. The NES was designed in a way to save the gaming market from collapsing completely and revive the enthusiasm for the video games culture. Secondly, the crash effectively began Japan’s domination in the home console market. Two new consoles were released within the span of one month, the Nintendo Family Computer and Sega’s SG-1000. They brought about the third generation of the home consoles, effectively outselling Atari’s existing systems.  

While Atari’s success was extremely fluctuant and ever-changing, it would be wrong to deny the hold it had on the gaming culture of the 70’s. Atari’s widespread popularity, affordability, and innovative culture had a pioneering effect on the way video games are perceived and produced today.