ruth_n_b

=B. Summary of Evidence (500-600 words) Tips]=

With the release and success of the Atari 2600 VCS (1), Atari became the unequivocal king of the home video game market despite competition from Coleco and Mattel, having sold over 16 million 2600s by 1984 (2). Their status as the fastest growing company in the US by 1982 garnered them 70% of Warner Communication's operating profits on the strength of their money-making capabilities. Successful Atari-developed games selling millions of copies such as //Adventure// and //Yar's Revenge// helped contribute to their reputation (3).

In 1982, Commodore released the Commodore 64 personal computer. The immense commercial success of the C64 undermined Atari's own PC sales due to the ever-decreasing cost (4) and the high capabilities of the computer not only for gaming but for other applications (5). By extension, the growing PC market negatively affected the home console market due to the value of the computers and their multifunctional properties (6).

March 1982 also saw the release of //Pac-Man// on the 2600. Due to the immense success of the //Pac-Man// arcade cabinet, Atari were convinced that the 2600 version would be a system-seller, optimistically ordering 12 million cartridges when their install base was 2 million systems short of that (3). It eventually became the best-selling game on the system but Atari were still left with unsold copies and more flooding in from consumers dissatisfied with the poor quality of the game itself, primarily as a result of low memory cartridges and time restrictions (7).

Warner then went on to license E.T. from Steven Spielberg, promising him $25 million in royalties (6). In the rush to complete the game for Christmas, Howard Scott Warshaw (8) was given only 6 weeks to program the game. His track record gave Atari enough confidence to release it without having play-tested it. The game itself was a mess and Atari ended up allegedly dumping the majority of the 5 million cartridges they had produced into a landfill in New Mexico (3)(9).

The 2600 was then further undermined by Coleco who released the Colecovision in 1982 packaged with a version of the popular arcade game //Donkey Kong//. The exclusivity of their license and the high technical specifications of the console helped them sell over a million by Easter 1983 (6). The Atari 5200, released in 1982 as a supposed technical successor to the 2600, ended up as a commercial failure due to competition not only with Mattel's Intellivision and Coleco but also with the 2600 itself. In an attempt to salvage the situation Atari bought licenses for arcade games, but Coleco's aggressive bidding tactics cost Atari millions (3)(10).

Throughout 1982 many companies followed in the footsteps of successful third-party publisher Activision, formed by four disgruntled ex-Atari employees. These publishers had free rein to produce whatever games they pleased for the 2600 due to the fact that Atari had no power to control the quality of these games (11). The flood of poorly produced games (12) left consumers unsatisfied with the console and with gaming itself whilst Activision's successes (13) undermined Atari's power as a brand, especially with the poor quality of their two biggest 1982 releases (6).

In December 1982, Atari announced a 10-15% growth projection, short of the 50% growth that executives were indicating beforehand (3). Investors were shocked. Warner stock prices plummeted 30%. Confidence in Atari, and the video game industry as a whole, began to collapse, and game sales dwindled (6). Atari lost $536 million by the end of 1983. These losses, coupled with the $425 million downsizing losses during a company overhaul in 1984, led to Atari having the home console and computer division of the company sold by Warner to Commodore's Jack Tramiel for $240 million (3), a sum far short of what would be expected for a company that was pulling in revenues of $1.23 billion three years prior to the sale and operating profits of over $100 million in the first half of 1982 (14).


 * 599** words.

1 - Atari's first cartridge-based home video game system. For the purposes of this essay I will be abbreviating this to "the 2600". 2 - Scott Mace (February 27th 1984). //Can Atari Bounce Back?// p100-106 & //James Morgan Speaks Out// p106-107. InfoWorld. 3 - Steven L. Kent (2001). //The ultimate history of video games//. Roseville, Calif.: Prima, (ISBN: 0761536434). 4 - This was due to a fierce price war between Texas Instruments and Commodore. Commodore eventually won out when TI pulled out of the PC business. 5 - Jeremy Reiner (2005). //Total Share: 30 years of personal computer market share figures//. Ars Technica [] 6 - Tristan Donovan, (2010). //Replay: The History of Video Games//. Yellow Ant Media Ltd (ISBN: 0956507204). 7 - Nick Montfort and Ian Bogost (2009). //Racing the beam//. Cambridge, Mass.: MIT Press, (ISBN: 026201257X). 8 - A programmer working for Atari who had previously developed //Yar's Revenge// and //Raiders of the Lost Ark//, both of which sold very well. 9 - "Then [Steve Ross, Warner CEO] ordered us to produce almost 5 million of these games. I told him "Steve, that's crazy. We never make five million of a product unless we have some market testing." He said, "Well, it's going to be a big hit because of Spielberg and E.T." So we made five million and practically all of them came back." Ray Kassar, former head of Atari - quote from (3). 10 - "Basically, we'd zap them. They had last right of refusal, so we'd just come up with a bid that was wild; then, of course, Atari would be forced to beat it...You know, the bidding on these software titles was just mind blowing." Al Kahn, former Executive Vice-President of Coleco - quote from (3). 11 - "Activision was the main cause of the crash, though indirectly...In one six month period 30 new companies sprang up trying to duplicate our success." David Crane, Activision co-founder - "There was way too much product, some of it inappropriate...we couldn't control the software for our system." Manny Gerard, former Vice President of Warner - quotes from (6). 12 - //Custer's Revenge// was particularly infamous example with obscene subject matter and broken gameplay. 13 - //Pitfall!//, a game developed and published by Activision, went on to become the second best selling game on the 2600: http://uk.retro.ign.com/articles/903/903024p1.html. 14 - Bernice Kanner (August 16th 1982). //Can Atari Stay Ahead of the Game?// p15-17. New York Magazine.