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TVTranscript
00:00Well, that space game there looks like a thrill a minute.
00:04We're going to try a real blast.
00:09In less than a year, it went from a golden age...
00:12It's part of the American culture.
00:14I mean, video games are just part of the culture as apple pie and motherhood.
00:17Now you're talking.
00:19To its darkest hour.
00:21Let's put it this way.
00:22A lot of people didn't like E.T.
00:24E.T. became the icon of the crash.
00:28It was really the demise of the business, and we unfortunately didn't see it coming.
00:33This game is awful and otherwise lacking any redeeming values.
00:37A lot of really bad games got out there.
00:41Not to say the bad games don't get out there still, but some really bad games got out there in
00:45the early 80s.
00:48This is the story of the birth and near death of the home video game market.
01:14The story begins just as the decade does.
01:17With big hair...
01:18I want to be different, and I think I look good the way I dress.
01:21And big dreams.
01:23The video game industry begins with a boom, having gone from a non-existent medium to annual sales of nearly
01:29$2 billion.
01:30And more and more arcade games move into homes.
01:35We used to joke at Activation that we'd ride a cartridge and throw it up in the air and money
01:39would fall out of the sky.
01:40I mean, every game we did was selling $500,000 to a million units.
01:44The profit margins were extraordinary.
01:48So the company was just making money faster than they could put it in the bank.
01:52And a generation of kids are hooked on games.
01:56I mean, it's part of the American culture.
01:58Video games are just part of the culture as apple pie and motherhood.
02:03Arcades are everywhere, and both kids and adults are drawn into the dark rooms, dropping endless quarters into the latest
02:09digital fad.
02:13The arcade crowd back in the old days was really weird, because you definitely had all the little scrubs like
02:17me.
02:18You know, like little kids who were riding their bikes there.
02:20And then you had, like, high school students, and you had college students.
02:22But then it was also really weird, because you had, like, businessmen.
02:28It was really weird, because it wasn't like a kid phenomenon.
02:31It was, like, really across-the-board phenomenon.
02:37Experts predict that by the mid-80s, combined arcade and home video game sales will soon be higher than movie
02:42box office revenue.
02:43As the summer of 1980 rolls around, Atari sues Activision, a software company made up of former Atari employees,
02:50over whether Activision has the right to produce games for Atari's popular 2600 video computer system.
02:57By December, the verdict is in, and the courts allow Activision to make the games.
03:02Four months later, sales for Activision titles reach $6 million.
03:07There was this perception that Atari was a fad.
03:09You know, people were comparing the 2600 to the Pet Rock, and that it couldn't be duplicated.
03:14And probably a lot of your viewers wouldn't even know what a Pet Rock is.
03:17But you had a lot of companies that had emerged overnight after Activision's success.
03:22And, of course, once Activision became successful, then came Magic.
03:26Imagine Steven attack.
03:28And Apollo, 2075, everyone had to jump into it.
03:35And that opened up the industry.
03:38Before then, no one had a clue.
03:39And I think that single, seminal event was the thing that really led to the overcrowding of the market.
03:45The home and arcade video game market is filling up with brand new companies.
03:49And, of course, as more and more companies got in, there was more and more game supply,
03:53and just not enough demand to support that much.
03:58And, plus, you have the games back then because of people rushing into the market.
04:03What happened was people wanted games that they recognized the titles.
04:09So if a new company got into the business, like Parker Brothers, for example,
04:13they would go out and spend a whole lot of money and get, like, the rights to Empire Strikes Back.
04:20James Bond.
04:26But they weren't experienced in video games.
04:28So they would get the best titles, but then they would produce the worst games.
04:32Toy companies like Parker Brothers and Hasbro form video game divisions.
04:37But when unrelated companies like Chuck Wagon Dog Food and Quaker Oats jump on board,
04:41the market begins to turn.
04:43Yeah, that was a problem.
04:44I mean, it was funny.
04:46I was talking to Steve Cartwright yesterday,
04:47and we remember how we went to CES and look at all these other companies and laugh
04:53and just say, this is a big joke.
04:55I mean, all the games were horrible.
04:57One year there were 10 extra companies.
04:59Next year there were 30 extra companies.
05:04A lot of people just got burned.
05:06They just got tired of getting all these bad games.
05:09So that drove people away from video games.
05:12There were no checks and balances for quality in those days.
05:15So a lot of really bad games got out there.
05:18I'd have to say the bad games don't get out there still,
05:20but some really bad games got out there in the early 80s.
05:24The world's greatest arcade video games are now the world's greatest home video games.
05:29They're only from Atari.
05:30Atari, with about 12 million consoles and homes,
05:33is still dominating the game industry
05:34until they release an old arcade favorite.
05:37That game?
05:39Fight.
05:39With disappointing results.
05:41Here comes Pac-Man, biggest game in the history of arcades.
05:45People are really excited.
05:47The pre-orders are huge.
05:48Atari is so sure that this is going to be a hit
05:51that they made more copies of Pac-Man
05:55than there were active VCSs in people's homes.
05:58And this would be a huge hit.
06:01Game stunk.
06:03Really, really stunk.
06:05It's pathetic.
06:07The ghosts keep on appearing and disappearing.
06:09They didn't move smoothly.
06:11Pac-Man didn't move smoothly.
06:13The mazes were not the same mazes that you saw in the arcade game.
06:16The dots were replaced with dashes.
06:20There was just nothing right in them.
06:26One of the employees at Atari, they were sorry about Pac-Man.
06:30They didn't like it.
06:32And he was at a video game store when it came out.
06:35And the father walked into the store because his son wanted Pac-Man.
06:39And the storekeeper gives him the cartridge, shows it to him.
06:42And you know, that's Pac-Man?
06:45And he didn't want to buy it, but his son wanted it.
06:48And the Atari employee just felt so bad that this was what they were marketing with the Pac-Man name.
06:53And it didn't resemble the game at all.
06:55In spite of the quality, the game sells well.
06:58But the disappointing translation creates wariness in Atari's fans.
07:02This game is thoughtful and otherwise lacking any redeeming values.
07:17By the summer of 1982, home and arcade video games have become an unstoppable industry,
07:23generating $2 billion in annual sales.
07:26Industry leader Atari has put video games in over 5 million households
07:31and grabbed a 40% share of the home computer market with the success of the VCS.
07:36I'd like an Atari 2600 system, please.
07:38And everything that goes with everything.
07:39I want everything.
07:41Ironically, when I arrived at Atari in 1982, we were saying, we're so big.
07:45Is that everything?
07:46It's not everything.
07:46You can get nearly 300 different copies.
07:48We're just as large as theatrical revenue for movies.
07:51It's amazing.
07:52It's amazing, but it's not everything.
07:53It's not everything.
07:54Now, does that sound familiar?
07:55Is that everything?
07:55That's everything.
07:56For now.
07:57For now.
07:58This is the Arcade Experience.
08:01We're ColecoVision, and we bring the Arcade Experience home.
08:05Coleco and Intellivision are not far behind with their own respective systems.
08:10For the first time in the video game industry, there were two systems at one time
08:13that were out there competing with each other.
08:15Intellivision, the world's largest toy company, battling Atari, bought by Warner Communications.
08:20Boom.
08:20It's going to be a big business thing, big stock thing.
08:22Oh, what's it going to be?
08:23What's it going to be?
08:24There's a growing library of Intellivision programs to involve every member of the family.
08:28And for families, it was no longer a question of, hmm, should we get a video game system?
08:33And that was, hmm, which video game system should we get?
08:36And now the sales for both, Atari and Intellivision, weren't way up.
08:39And so, boom, they're going up.
08:40I'm back a path.
08:41Go for it, Dad.
08:42Caught it.
08:43The competition just became really intense.
08:47But the bubble is about to burst.
08:51Only from Atari.
08:53In July 1982, Atari agrees to pay $25 million for the rights to produce a video game based on the
08:59hit movie E.T.
09:01The way E.T. came down, I got a telephone call.
09:05And I'm like, hello.
09:06And someone goes, is this Howard?
09:08And I go, yes.
09:09They go, please hold for Ray Kazar.
09:11So I'm holding for Ray Kazar.
09:14And Ray comes on.
09:15And this is late in July.
09:16Ray says, hey, Howard, we need E.T.
09:19And we need it by September 1st.
09:22So that's like five and a half, six weeks.
09:24He goes, can you do it?
09:26And I said, you know something, Ray?
09:29I can definitely do it, provided we reach the right arrangement.
09:36Atari spent how many millions of dollars to get the rights to E.T.
09:40and then rushed it into production and came up with this terrible game.
09:44So admittedly, probably he did the best thing he could in the time they framed, they gave him.
09:48But they started putting in possible schedules on everybody.
09:50So that also damaged the quality of games.
09:54Unfortunately, that's what Atari was doing.
09:55They were after the name, thinking, well, we could sell anything.
10:01They manufactured more copies of E.T. than there were Atari 2600s in existence.
10:07Not a good idea.
10:08Having already been bitten by poorly produced games,
10:11Atari owners aren't standing in line for the extraterrestrial.
10:15Let's put it this way.
10:16A lot of people didn't like E.T.
10:18A lot of people who didn't even play E.T.
10:22or know anything about E.T.
10:23got into E.T. bashing.
10:25It was the thing to bash because E.T. became the icon of the crash.
10:30I mean, the crash was something everyone was aware of, and E.T. became a thing.
10:35Because when you tell a story, you can't just tell the whole story, you've got to personify it.
10:38That's what they say about storytelling.
10:41So the gaming industry crashed.
10:44That's too big a story.
10:45It doesn't make sense.
10:47E.T. killed the game industry.
10:50That gives you a focus, that gives you a thing to hate, and E.T. became that.
10:54In the winter of 1982, Atari is forced to announce crippling financial losses.
11:01Sales of its video game cartridges take a nosedive.
11:05We have E.T., for example, a wonderful love story cartridge.
11:09Contributing to a 50% drop in earnings.
11:12Thus, Atari, which once monopolized the charts, this week has only one of the top five.
11:17But business is still very good.
11:19Mattel, the company behind Intellivision, also announces losses.
11:23I didn't know.
11:24And the arcade is suffering their own demise.
11:27We filled the arcades with them, and we were starting to fill secondary locations like Safeways, and 7-Elevens, and
11:34dentist offices, and by the middle of 1982, we were just full.
11:38It was a fad.
11:39I think there's no other way to put it.
11:41It was like early rock and roll, really.
11:45Enough people started coming, and enough companies started making games.
11:48It just kept growing, you know, and people, you know, built bigger and bigger ones, until finally, you know, the
11:53whole thing had to serve.
11:54It sort of collapsed under its own weight.
11:59Starting in 1982 or so, a single quarter was not enough revenue for a game to earn for a two
12:07-minute period.
12:08We ultimately figured out that we needed a buck, and we don't have dollar coins in the States.
12:14A buck is a big spend.
12:15It's not a casual spend.
12:16A massive influx of new games leaves distributors overwhelmed with products, and even quality games are getting lost in the
12:24struggle for shelf and advertising space.
12:28The problem was there was just too much product out there.
12:31You have dozens and dozens of software companies releasing garbage.
12:37A lot of what killed Atari was an incredible number of companies getting into the business producing incredibly bad games.
12:44There was too much product for store shelves.
12:46They had to start being marked down.
12:48We said, oh, they're all going to go out of business, but we didn't recognize what that meant.
12:52And what that meant was when they all went out of business, all that product would flood the retail shelves.
12:57Most of those games wound up being sold at $2 and $3 a piece at discounters.
13:02And here we are coming out with $30 or $40 products.
13:05No matter how good a game was, it was very difficult to sell a game for $30, $40 when you
13:10could go in for $30, $40 and get 15 games, even if they were all terrible.
13:15And Johnny's dad goes in at Christmas, and he can buy him eight cartridges, or he can buy him one
13:19cartridge.
13:19And he says, well, I don't know the difference.
13:21I'll buy him these eight that are in the front bin and wrap up more gifts for Christmas.
13:25And ours that were still frontline good products didn't sell.
13:29You have your third party companies, can't sell their stuff, they're going out of business.
13:33What do they do? They dump all their goods at cutthroat prices.
13:37Now you can get games for $5.
13:39It was a very difficult paradigm for them to beat.
13:42It was really the demise of the business, and we unfortunately didn't see it coming.
13:46And the lack of foresight on the technology front further cripples the industry.
13:51Even in the 2600, the day we shipped the first one, I told the guys at Warner, I said, this
13:57product, you know,
13:58is over in three years or four.
14:01We've got to start designing, you know, the Stella 2.
14:05And they just didn't get it.
14:06They thought that, well, how could that be?
14:09Look at Atari basketball and Intellivision.
14:13Again, I find Intellivision more sophisticated.
14:15And it turns out that not innovating led to the demise of Atari in 1982, 83.
14:21And they just didn't see it.
14:23They just didn't see it.
14:25In September of 1983, in the middle of the night, 20 tractor trailers leave an Atari warehouse loaded with millions
14:32of unsold game cartridges.
14:34They are driven to a remote site in Elmogordo, New Mexico, where the games are crushed and buried.
14:51In the fall of 1983, only a year after analysts were predicting record profits for the video game industry, the
14:58bottom had dropped out.
15:02Did I mention the targets?
15:05Atari, the industry leader, posted a $356 million loss for the second quarter alone.
15:11Well, rode the wave a little bit.
15:15Really crashed after Christmas of 83.
15:18And Activision sales plummeted.
15:21I mean, just plummeted by 84, 85.
15:23Probably went to a fifth of what they were.
15:25If you're going to spend your time playing video games, get a Commodore 64 or...
15:29And we went on to the Commodore 64 because the 2600 was gone and there was no coming back.
15:35There actually was. That's another story.
15:37But at the time, you thought there was no coming back.
15:39If you think ColecoVision plays all Atari cartridges...
15:41You mean it can't?
15:42In an attempt to jumpstart the failing industry, Atari releases the 5200.
15:47Now you're talking.
15:48Updating the technology behind their aging system.
15:51But many believe it's too little, too late.
15:54Super system.
15:55Much of the public can't grasp the need for a new system.
15:59Of course, when the 2600's lifespan ran out and they had to go to the 5200,
16:05the American consumer went, wait a minute.
16:08I've had the same record player for 25 years.
16:11I've had the same television set for 25 years.
16:14Why are you suddenly telling me now that after like four years, five years,
16:18I've got to trade in this game system for a whole new game system.
16:21This is a very difficult concept to get across.
16:25That began the great backslide where the industry died for two years.
16:30To make matters worse, home video game systems are now facing competition from personal computers.
16:36With the drop in price and increase in power, PCs officially take the lead.
16:42Games fell into decline just in terms of perception.
16:47I'll give you an example.
16:49Our publisher actually told us at one point, I used these exact words.
16:53He said, please try to avoid using words like games and fun in the articles you write.
17:00Because now everything had to be a simulation.
17:04It was like people would be more interested in running a simulation of a dairy farm
17:09than they were going to be in playing Breakout.
17:12But that was the feeling was that we've now moved past video games.
17:17We're now into computers.
17:19And all computers should do is create educational simulations.
17:25The rise of personal computers affected video games in a number of ways.
17:29It allowed users to do more.
17:30I mean, the keyboard instrument allowed people to do things they couldn't before in games.
17:35Like, you have all these functions on the keyboard.
17:40Many of the companies who a year earlier were so desperate to get into the business of making games
17:45were now just as desperate to distance themselves from it.
17:49February 1984, Mattel announces it will sell Intellivision off for $20 million.
17:55In March 1984, Odyssey closes its doors.
18:01And finally, on July 2nd, 1984, Warner Communications agrees to sell Atari.
18:11The game companies start to vanish.
18:13People begin to think of video games as having only been a fad.
18:19Which would soon disappear.
18:23But thanks to Japanese game company Nintendo, those people are wrong.
18:28By 85, 86, when the Nintendo came out, I must tell you when I first looked at it, I was
18:33not impressed.
18:34I did not think that this was going to bring back video gaming.
18:38Yet it did, because people wanted that simplicity.
18:42The Nintendo Entertainment System, or NES, gave gamers better graphics.
18:49Better games.
18:52And single-handedly revived the home console market.
18:56The one thing that we always like to try to do is try to create games that people who have
19:03never played games before
19:04can pick up and try out and immediately enjoy and have fun with.
19:10Nintendo turned the industry around with big franchises, games that people really wanted to play.
19:16Likeable characters like Super Mario.
19:20And from the beginning, Nintendo was careful to avoid the mistakes of their American counterparts.
19:26To set themselves apart, game packs replace game cartridges.
19:30And robots are added.
19:35Now, the manufacturers, Sony and Microsoft, Nintendo, they have approval over the games.
19:42They look at the games and say, is this good enough?
19:45Is this of a quality to be on our system?
19:55Nintendo reinvented the world.
19:57Nintendo showed that people still wanted entertainment.
20:00They still wanted fun and they still wanted games.
20:09And the games do go on.
20:13Today, nearly 145 million people play games.
20:17An industry that nearly faded, now enjoys even greater popularity and keeps growing.
20:23But has the game industry learned from its mistakes?
20:31I'd like to think that the console industry won't crash again.
20:34But you never know.
20:38I think something that companies have learned from the crash of 1983 was that don't put all of your eggs
20:44in one basket.
20:46Don't bank on just one game.
20:48Make sure you have a safety net below you with a couple of games that will help you get by.
20:53You can't rely on just one game anymore.
20:56It's all about diversifying your lineup.
20:59And making sure you have a little something for everybody just in case gamers go,
21:02I don't want that anymore.
21:04This is what I want.
21:05Hopefully, you have that too.
21:06Quando you go.
21:08Do it remember.
21:19Catch your day in New York.
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