In late 1983, the sudden crash and bankruptcy of many video game businesses signified an end to a generation of video gaming. Many of the now defunct companies produced arcade game machines and some attempted to produce competitive personal computers to battle the emerging Commodore 64 home computing system. Take notice that this event may be called “Video game crash of 1984”, since the aftereffects took some time to realize and thus some analysts referred it in the year 1984.
Geographically, the crash happened mostly in North America because most of the demand for video game systems was situated in either the United States or Canada. For the following three years from 1984 to 1987, video gaming fell into a “Dark Age”, because the market drastically shrunk and little interest and effort was put into developing video games. However, the industry undertook a facelift in 1985 when Nintendo released their Nintendo Entertainment System (NES); in 1987, the industry was back on track when the NES gained widespread recognition.

“For the masses, not the classes” was the slogan that Jack Tramiel used to introduce the Commodore 64 to the public audience. It was effective because the low cost personal computers led to competition with video game systems and arcades. With its low cost (which rivals game/home consoles) and constant advertising of its educational value, these home computers received positive feedback, while millions of consumers decided to switch from game/home consoles to the cheap PC’s.

As for the quality of games, many of the highly advertised Atari 2600 games were actually boring and dull, and games that were based on movie hits such as E.T. were failures too. To top it off, there was a rumor of Atari dumping and burying millions of unsold E.T. game cartilages in a landfill, which helped fuel the view that the video game fad is over. Likewise, the “view” of the video game fad being over can be seen in video game stores that reallocated shelf spaces to other products.

The Emergence of The Attractive Budget Electronic: Who, What, When, Where and Why it was better.

When: This happened around the same time as the video game crash.

Who: In the pre-1980 era, PCs were specialty items that cost more than an average person’s salary, for example, $1,000 USD or more. Nevertheless, the arrival of the 80’s introduced new budget computers, and many of them sported external video outputs and had the ability to output colored graphics and simple audio. Many budget computers competed to be the best, such as the Commodore Vic 20 that cost $199, the TI 99/4A at $349, (16K) Atari 400 at $349, the Radio Shack Color Computer at $379 and finally the most expensive computer, the Commodore 64 that costs $499.

What & Why: Computers were very similar to the consoles, but they had more memory, graphic and audio capabilities. With such advanced hardware, these machines allowed basic word processing and gaming capability, and since programs came on floppy disks (on the contrary to ROM modules on a console, which are not reproducible), users were able to copy and distribute these programs. Where: As stated in the first paragraph, the computer “boom” happened in the United States and Canada and Commodore even used many advertisements to attract its customers in this area. The company often focused on the better effects of its computers, for example, how it will help a child prepare for college or university. However, reality is that this is all advertisement strategies and helped improve the sales of computers while simultaneously lowered console sales.

Commodore’s selling strategy allowed more people to buy the machines because they sold them side by side along with video game consoles in many stores. Another reason behind the Commodore’s success is that the company has vertical integration and it allowed some serious price adjustments, which drove many competitors, notably Atari, into tight situations or simply bankruptcy.

Similar to toys, the video games were sold on a basis that if it is not popular, unsold games are returned to the publisher for some money and an exchange for a different game title. This cycle continues until the store is able to sell all of the games, although it was this type of working that helped fuel the Video Game Crash of 1983. Before the crash, several of Atari’s top game designers left the company and founded Activision because Atari did not include credits in their games and had no bonus or royalty pays based on the sales of a game. Since the Activision personnel had programming experience for the Atari systems, Atari sought out a lawsuit to stop the competing company from releasing products. Time passed, but Atari made little progress on the restraining order and in 1982, the case closed with Activision still selling products.

Leading on, the closin g of the case led to third-party development and many companies hurriedly opened their own video game segment in the hope that they will attract big companies and many consumers to their products. Of course, the industry was still young, there were limited amounts of people to hire, and this caused many companies to hire competing companies’ programmers or reverse engineered games to learn the syntax for proprietary machines. On one case, Atari hired some of Intellivision’s staff and it angered Mattel, causing them to plan a lawsuit against Atari with possible industrial espionage.

While the above listed events were happening, the core manufacturers were unable to control the output of games because rivaling companies had knowledge in their systems and were able to produce games of any quality, be it good or horrible. Even though several companies like Activision or Atari had top-quality and experienced designers, the other companies did not have access to such resources. This resulted in a poor output of titles because they were rushed but had very little entertainment value, and in fact, most of these games were advertised as promising and fun filled games but were actually boring and unattractive when played.

Ironically, the strong game companies also helped bring the industry into the crash, for example, millions of game cartridges were manufactured for the heavily advertised game “E.T.” because developers hoped for a big hit. On the contrary, the game rushed into development and only took six weeks total from planning to release. This hurried job was reflected by very low sales, and it gave Atari a mass produced game with a very weak marketing value. To add to the damage, the game’s inadequate quality had spread quickly and made headlines, with journalists saying that “The video game age was coming down.”

Since there was a huge input of poor games in 1982, the makers of the games faced enormous problems (regarding the business style explained above) when store after store came to ask for replacement games or cash. The rapid fluctuations in the market lead to the closure of the hastily started businesses such as “Games by Apollo” and the Quaker Oats “US Games”.

With nowhere to send the unsold games, toy stores (started on Christmas of 1982) took all the unpopular titles and placed them in the discount and sale areas. These titles originally costs $34.95 ($71 now) USD, but after the readjustment games were selling for $4.95 and when June of 1983 came, buying expensive ($34.95) games became a niche market and the sales were all redirected to the discount bins.

These chain reactions caused an industry-wide change. Many major companies, including Mattel, Magnavox and Coleco withdrew from the video game industry and looked elsewhere to sell different products, and one unfortunate company, Imagic, had to take out its IPO right before the company went public – it collapsed soon afterwards. Activision struggled to stay in the market for several more years because it had support to help their income from the IRS; however, the rest of the smaller software companies that produced Atari games simply closed.

As for coin-insert arcade machines, many people thought they were still a surviving form of video game entertainment, since many of them were placed in commercial districts, and visitors will love to spend a little money to have some great fun. However, they were part of the Crash and their uses dropped too. Yet again, this was the year (1983) that the game Dragon’s Lair was introduced onto a CD that further helped drive up computer sales.

As for personal computers, a huge price war happened between big competitors and it lead to the closure of the computing divisions of companies. One professional analyst stated: Jack Trameil, the owner of Commodore, began the war by slashing prices of the Vic down to $139 and the Commodore64 down to $400. Texas Instruments easily responded by reducing the price of the 99/4A down to $149. Tramiel returns the favor and further reduces the price of the Vic to make it a sub $100 computer. Texas Instruments stays strong and decided to cut the 99/4A down to a $100 computer and at this stage, the Vic and 99/4A were closely matched. However, shortly after the massive price cuts Texas Instruments reported the then-worst loss in corporate history and pulled out of the home computer segment after three months. Even after Texas Instruments pulled out of the competing market, Jack Tramiel was still looking for more sales and announced a price cut for the Commodore64 down to a $200 value. His company happily dominated the Christmas buying season.
In 1984, Warner Communications sold Atari, since it was nearing bankruptcy and the parent company did not want to have falling stocks. However, the buyer of Atari was Jack Tramiel, but it had reason because the Commodore Board of Directors decided to remove Tramiel because they wanted to focus elsewhere other than personal computers.

Firstly, the home video game fad moved from the North American region and into Japan, as it was the Nintendo NES that brought the industry back on track in 1987. Atari returned to the fray and a company called Sega (from Japan) joined the competition and began producing home video consoles. Sadly, Atari was unable to return to its former glory and pulled out in 1996 after the attempt to sell the Atari Jaguar.
Secondly, a reason behind the crash was that companies had access to their competitors’ information because they were able to reverse engineer the systems. In order to prevent these acts of industrial espionage, Nintendo pioneered the task of including copyright notices in all of their game cartridges. The technique worked because the game must have the Nintendo copyright statements to run and if rival companies attempt to produce “unauthorized” games they will have to risk legal actions from Nintendo. This laid the groundwork for current copyright practices in the video games industry.
On a rare case, Accolade won one legal case against Sega regarding the type of control listed above, and won. Further down the years, some daring companies like Tengen (Atari), Color Dreams and Camerica attempted to dispute the Nintendo style of controlling how their games worked. In the end, these companies were unsuccessful and met commercial closures. The Nintendo control system remained in use with different alterations used by other major video game consoles.
Furthermore, Nintendo was financially smart and limited any third-party publisher so that they were allowed to produce five games in one year on any system. To safeguard their games, (again, to prevent the major commercial secrecy problems from 1983), Nintendo had the publishers wage them the full price of the game so that the publishers will not walk out on them with a game design. Meanwhile, no game cartridges could be returned to Nintendo for a new one. Nintendo explained that all these preventative measures were to reduce worries for the gaming body and at the same time reduce low quality games. To finalize the preventative touch, they placed a “Golden Seal of Approval” on every game released for their systems. It acted as a visual marker for gamers to understand that this game is guaranteed to be enjoyable.
Nowadays, many hardware manufacturers charge a small fee for every piece of item sold to help “defend their rights”. This proves to be beneficial for console manufacturers like Nintendo (or Sony and Microsoft now) because it gives them control over the quality of games produced by the third-party programmers. It also allows them to avoid a reenactment of the game “Custer’s Revenge” that seriously damaged the Atari 2600’s reputation.