originally published September 18, 2013
In my lifetime I have been fortunate enough to witness the birth and subsequent collapse of a handful of markets. I watched the dot-com bubble explode from my own safe little corner of the internet (no, not only on porn sites, but thank you for thinking so highly of me). I saw the home video world puff out its chest, cough up video stores into every local strip-mall, then wheeze out the back door, leaving a debris-pile of empty retail space and stripped-bare yellow signage.
Mine was the first generation to plug in to the home video game market. I also saw it plummet into a dark, ugly void before rising from its ashes in a flutter of plumber-leaps and hedgehog spikes. But there was a period of about two years, while Mario and his Nintendo friends were still stretching their legs and warming up for the North American market, when the entire floor beneath the home console world just about collapsed.
I’m not talking about a dip in profits that forced a few executives to hold off on reupholstering their yacht couches. This was roughly a 97% dip in the market, which is more a light-the-damn-yacht-on-fire-and-collect-the-insurance-money situation. A crash the likes of which we haven’t seen since. So what the hell happened?
For those who haven’t been keeping track, we are up to the seventh generation of video game consoles, with the eighth already pulling its car into the parking lot outside and looking for a space (actually, the Wii U crashed the 8th generation party a little early). The first generation included the Magnavox Odyssey and Pong. An excessive number of clone machines that could Pong it out as well as the brand-name consoles led to the first video game crash in 1977, leaving only Atari and Magnavox in the market.
By 1983 we were once again uvula-deep in game console systems. Atari had two systems, the 2600 and the 5200 (which couldn’t play each other’s games at first), while gamers could also choose between Mattel’s Intellivision, ColecoVision, and a slew of other brands. Though if your parents bought you an Emerson Arcadia 2001 or a Bally Astrocade, they probably didn’t really love you.
The runner to beat in the console race was of course the Atari 2600. There were literally hundreds of games for the system, so it didn’t really matter that most of the other consoles had their graphics and gameplay beat by a mile. But when a number of high-profile game releases (the cruddy port of Pac-Man and the dreadful ET: The Extra-Terrestrial I’ve covered in depth) came bundled with the unfortunate stench of fun-less crap, consumers began to lose interest.
The real threat was creeping in from the computer stores. With the mighty Apple II and the ultra-cheap Commodore Vic-20 (only $199) and Commodore-64 ($499), people were discovering games that were smarter and deeper and able to be saved to disk. Plus these computers could be used as word processors and budget-balancers – a much more logical sell to parents than a console system that only played games.
Atari’s feet slid way down the slope when a bunch of its programmers left to form Activision. Atari didn’t put credits on their games and they didn’t pay any royalties to their games’ creators, prompting a mass exodus. Once the mavericks at Activision set the bar, third-party developers started oozing from the woodwork, flooding the game cartridge market and kicking Atari’s profits deep in the nuts.
Most stores didn’t have the shelf space to accommodate all these new games. The trip from the New Release rack to the Discount bin was getting shorter and shorter, and to keep up Atari pinched out the hurried and under-worked Pac-Man and ET games. By the second half of 1983, Atari was bleeding money like a skydiving hippo who’d landed on a fencepost. They fired their CEO, buried thousands of unsold cartridges in a New Mexican landfill, and tried to regroup.
Magnavox and Coleco hung up their video game cleats and went on to make military defense systems and Cabbage Patch dolls respectively. Activision stayed alive by making games for the computer market. Intellivision, which had tried to branch into the PC world with a crappy computer add-on which didn’t do anything and IS NOT THE SAME THING AS A REAL COMPUTER DAD!!!!!… whoops, sorry about that. Anyway, the Intellivison died early in 1984.
In 1982, North Americans were pouring pillow cases of cash into the pockets of the video game industry, spending $3 billion on units and games. By 1985 that number had dropped to $100 million. Retailers responded as they would to anything they considered a fad on its way out: they booted the games off the shelves and made room for something else. Maybe they’d use the space for the next batch of Star Wars toys or the new breed of elbow-pivoting GI Joe action figures. But video games were a black hole, which didn’t bode well for those of us who were nine or ten years old and not yet ready to relinquish our love of gaming.
Of course we all know who swooped in to save the day.
The Nintendo Entertainment System dropped in October 1985, ushering in the 8-bit third generation of video games. Sega’s Master System would fight it out with Atari for the #2 spot, but clearly one of the biggest impacts of the video game crash was the creative shift from North America to Japan. Atari kept hacking out feeble attempts at clawing back to the top, but after the Atari Jaguar flopped in 1996, they stepped out of the ring. It wasn’t until Microsoft’s Xbox showed up in 2001 that an American company would reclaim a portion of the console pie.
Another effect of the crash was a major tightening on third-party developers. The era of secrecy and corporate espionage was over – Nintendo let third-party companies make five (and only five) games per year, but Nintendo had dibs on building the physical cartridges, and if the game was a flop, the publisher would eat the loss, not Nintendo. This was their way of keeping the market from being flooded with garbage.
The console market is considerably different today, with Microsoft, Sony and Nintendo hanging on to their decade-long chokehold on the industry. But as the eighth-generation units swoop onto shelves for the Christmas season, we should keep our eyes open for what happens next. Someone new will toss a successful console onto shelves in the next few years, and when that happens, somebody else will fall. Who knows – it might be Nintendo next.
Or maybe… maybe it’ll be the entire industry. For a while.