 The Atari logo, also known as the "Fuji" | |
| Industry | Video games |
|---|---|
| Founded | June 27, 1972; 53 years ago (1972-06-27) |
| Founders | |
| Defunct | June 26, 1992; 33 years ago (1992-06-26) |
| Fate | All operating divisions sold off in 1984–85. Merged into parent company in 1992. |
| Successors | |
| Headquarters |
|
| Products | |
| Parent | Warner Communications (1976–1990) Time Warner (1990–1992) |
| Subsidiaries | Chuck E. Cheese (1977–1978) Kee Games (1973–1978) |
Atari, Inc. was an Americanvideo game developer andhome computer company founded in 1972 byNolan Bushnell andTed Dabney. Atari was a key player in the formation of thevideo arcade andvideo game industry.
The company was founded inSunnyvale, California, in the center ofSilicon Valley, to developarcade games, starting withPong in 1972. As computer technology matured with low-costintegrated circuits, Atari ventured into the consumer market, first with dedicatedhome versions ofPong and other arcade successes around 1975, and into programmable consoles usinggame cartridges with theAtari Video Computer System (Atari VCS or later branded as the Atari 2600) in 1977. To bring the Atari VCS to market, Bushnell sold Atari toWarner Communications in 1976. In 1978, Warner brought inRay Kassar to help run the company, but over the next few years, gave Kassar more of a leadership role in the company. Bushnell was fired in 1978, with Kassar named CEO in 1979.
From 1978 through 1982, Atari continued to expand at a great pace and was the leading company in the growing video game industry. Its arcade games such asAsteroids helped to usher in agolden age of arcade games from 1979 to 1983, while the arcade conversion ofTaito'sSpace Invaders for the VCS became the console's system seller andkiller application. Atari's success drew new console manufacturers to the market, includingMattel Electronics andColeco, and fosteredthird-party developers such asActivision andImagic.
Looking to stave off new competition in 1982, Atari leaders made decisions that resulted in overproduction of units and games that did not meet sales expectations. Atari had also ventured into thehome computer market with its first8-bit computers, but its products did not fare as well as its competitors'. Atari lost more thanUS$530 million in 1983, leading to Kassar's resignation and the appointment ofJames J. Morgan as CEO. Morgan attempted to turn Atari around with layoffs and other cost-cutting efforts, but the company's financial hardships had already reverberated through the industry, leading to the1983 crash that devastated the U.S. video game market.
In July 1984, Warner Communications sold the home console and computer division of Atari toJack Tramiel, who then renamed his companyAtari Corporation. The original Atari, Inc. was renamed Atari Games, Inc. after the sale. In 1985, Warner formedAT Games, Inc., a joint venture with Namco that acquired the coin-operated assets of Atari Games, Inc. AT Games was subsequently renamed Atari Games Corporation. Atari Games, Inc. was then renamed Atari Holdings, Inc. and remained a non-operating subsidiary of Warner Communications and its successor,Time Warner, until being merged back into the parent company in 1992.
![Short lived logo used in mid-1973[2]](/mt/?noimg=&dark=on&url=https%3a%2f%2fen.wikipedia.org%2fwiki%2fFile%3aAtari_logo_1973.svg){kind=logo}
While studying at theUniversity of Utah, electrical engineering studentNolan Bushnell had a part-time job at anamusement arcade, where he became familiar with arcadeelectro-mechanical games. Bushnell watched customers play and helped maintain the machinery, while learning how it worked and developing his understanding of how the game business operates.[3]
In 1968, Bushnell graduated, became an employee ofAmpex in San Francisco and worked alongsideTed Dabney. The two found they had shared interests and became friends. Bushnell shared with Dabney his gaming-pizza parlor idea, and had taken him to the computer lab atStanford Artificial Intelligence Laboratory to see the games on those systems.[4] They jointly developed the concept of using a standalone computer system with a monitor and attaching a coin slot to it to play games on.[4]
To create the game, Bushnell and Dabney decided to start a partnership called Syzygy Engineering in 1971, each putting inUS$250 of their own funds to support it.[4][5] They had also asked fellow Ampex employee Larry Bryan to participate, and while he had been on board with their ideas, he backed out when asked to contribute financially to starting the company.[6]
Bushnell and Dabney worked withNutting Associates to manufacture their product. Dabney developed a method of using video circuitry components to mimic functions of a computer for a much cheaper cost and a smaller space. Bushnell and Dabney used this to develop a variation onSpacewar! calledComputer Space, where the player shot at twoUFOs. Nutting manufactured the game. While they were developing this, they joined Nutting as engineers, but they also made sure that Nutting placed a "Syzygy Engineered" label on the control panel of eachComputer Space unit to reflect their work in the game.[4][7]Computer Space did not fare well commercially when it was placed in bars, Nutting's customary market. Feeling that the game was simply too complex for the average customer unfamiliar and unsure with the new technology, Bushnell started looking for new ideas.[8] About 1,500Computer Space cabinets were made, but were a difficult product to sell. While Bushnell blamed Nutting for its poor marketing, he later recognized thatComputer Space was too complex of a game, as players had to read the instructions on the cabinet before they could play. Bushnell said, "To be successful, I had to come up with a game people already knew how to play; something so simple that any drunk at any bar could play."[6]
Bushnell began seeking other partners outside of Nutting, and approached pinball game manufacturerBally Manufacturing, who indicated interest in funding future efforts in arcade games by Bushnell and Dabney if Nutting was not involved.[4] The two quit Nutting and established offices for Syzygy inSanta Clara,[9] at that point not yet taking a salary since they had no products.[4] Bally then offered themUS$4,000 a month for six months to design a new video game and a new pinball machine.[4] With those funds, they hiredAl Alcorn, a former co-worker at Ampex, as their first design engineer.[6] Initially wanting to start Syzygy off with a driving game, Bushnell had concerns that it might be too complicated for Alcorn's first game.[8]
In May 1972, Bushnell had seen a demonstration of theMagnavox Odyssey, which included a tennis game. According to Alcorn, Bushnell decided to have him produce an arcade version of the Odyssey's Tennis game,[10][11][12] which would become known asPong. Bushnell had Alcorn use Dabney's video circuit concepts to help develop the game, believing it would be a first prototype. However, Alcorn's success impressed both Bushnell and Dabney, leading them to believe they had a major success on hand and prepared to offer the game to Bally as part of the contract.[4]
Meanwhile, Bushnell and Dabney had gone to incorporate the firm, but found that a company called Syzygy (anastronomical term) already existed in California. Bushnell enjoyed the strategy board gameGo, and in considering various terms from the game, they chose to name the companyatari, a Japanese term当たり that, in the context of the game, means a state where astone or group of stones is imminently in danger of being taken by one's opponent (equivalent to the concept ofcheck inchess).[4] Other terms Bushnell had offered includedsente (when a Go player has the initiative; Bushnell would use this term years later to nameanother company of his) andhane (aGo move to go around an opponent's pieces).[6] Atari was incorporated in the state of California on June 27, 1972.[6][13]
Bushnell and Dabney offered to licensePong to both Bally and its Midway subsidiary, but both companies rejected it because it required two players. Instead, Bushnell and Dabney opted to create a test unit themselves and see how it was received at a local establishment.[4] By August 1972, the firstPong arcade cabinet was completed. It consisted of a black and white television fromWalgreens, the special game hardware, and a coin mechanism from a laundromat on the side, which featured a milk carton inside to catch coins. It was placed at Andy Capp's, a local tavern inSunnyvale, to test its viability.[14] The test was extremely successful, so the company created twelve more test units, ten of which were distributed across other local bars.[4] They found that the machines were averaging aroundUS$400 a week each; in several cases, when bar owners reported that the machines were malfunctioning, Alcorn found that it was because the coin collector had been overflowing with quarters, shorting out the coin slot mechanism.[4] They reported these numbers to Bally, who still had not decided on taking the license. Bushnell and Dabney realized that they needed to expand on the game, but formally needed to get out of their contract with Bally. Bushnell told Bally that they could offer to make another game for them, but only if they rejectedPong; Bally agreed, letting Atari off the hook for the pinball machine design as well.[4]
After talks to releasePong through Nutting and several other companies broke down, Bushnell and Dabney decided to release the game on their own,[8] and Atari, Inc. transformed into a coin-op design and production company. Using investments and funds from a coin-operated machine route, they leased a former concert hall and roller rink in Santa Clara to producePong cabinets with hired help for the production line. Bushnell had also set up arrangements with local coin-op-game distributors to help move units. Atari shipped their first commercialPong unit in November 1972. Over 2,500Pong cabinets were made in 1973, and by the end of its production in 1974, Atari had made over 8,000Pong cabinets.[15]
Atari could not producePong cabinets fast enough to meet demand, leading to a number of existing companies in the electro-mechanical games industry and new ventures to produce their own versions ofPong.[16]Ralph H. Baer, who had patented the concepts behind the Odyssey through his employerSanders Associates, believed thatPong and these other games infringed on his ideas.Magnavox filed suit against Atari and others in April 1974 for patent infringement.[17] Under legal counsel's advice, Bushnell opted to have Atari settle out of court with Magnavox by June 1976, agreeing to pay$1,500,000 in eight installments for a perpetual license for Baer's patents, and to share technical information and grant a license to use the technology found in all current Atari products and any new products announced between June 1, 1976, and June 1, 1977.[18][19]
Around 1973, Bushnell began to expand out the company, moving their corporate headquarters toLos Gatos.[20] Bushnell contracted graphic design artistGeorge Opperman, who ran his own design firm, to create a logo for Atari. Opperman has stated that the logo that was selected was based on the letter "A", but considering Atari's success withPong, created the logo to fit the "A" shape, with two players on opposite sides of a center line. However, some within Atari at the time dispute this, stating that Opperman had provided several different possible designs, and that this was the one selected by Bushnell and others. The logo first appeared on Atari's arcade gameSpace Race in 1973, and became known as the "Fuji" due to its resemblance toMount Fuji. In 1976, Atari hired Opperman to establish the company's own art and design division.[21]
From late 1972 to early 1973, a rift in the business relationship between Bushnell and Dabney began to develop, with Dabney believing he had been pushed to the side by Bushnell, who saw Dabney as a potential roadblock to his larger plans for Atari.[20] By March 1973, Dabney formally left Atari, selling his portion of the company forUS$250,000.[22][20][23] While Dabney would continue to work for Bushnell on other ventures, includingPizza Time Theaters, he had a falling out with Bushnell and ultimately left the video game industry.[4]
In mid-1973, Atari acquiredCyan Engineering, a computer engineering firm founded by Steve Mayer and Larry Emmons, following a consulting contract with Atari. Bushnell established Atari's internal Grass Valley Think Tank at Cyan to promote research and development of new games and products.[24]
In September 1973, Atari secretly spawned a "competitor" calledKee Games,[25] headed by Bushnell's next door neighbor Joe Keenan, to circumventpinball distributors' insistence on exclusive distribution deals. Both Atari and Kee could market (virtually) the same game to different distributors, with each getting an "exclusive" deal.[26] Kee was further led by Atari employees: Steve Bristow (a developer that worked under Alcorn on arcade games), Bill White, and Gil Williams. While early Kee games were near-copies of Atari's own games, Kee began developing their own titles, which drew distributor interest to the subsidiary and helped Bushnell realize the disruption of the exclusive distribution deals.[26]
In 1974, Atari began to see financial struggles, and Bushnell was forced to lay off half the staff.[24] Atari was facing increased competition from new arcade game producers, many which madeclones ofPong and other Atari games. An accounting mistake caused the company to lose money on the release ofGran Trak 10.[24] Atari also tried to open Atari Japan, a division to sell their games in Japan, but the venture had several roadblocks. In a 2018 interview, Alcorn described the situation as "an utter disaster beyond recognition".[27] Bushnell said, "We didn't realize that Japan was a closed market, and so we were in violation of all kinds of rules and regulations of the Japanese, and they were starting to give us a real bad time."[27]Ron Gordon, who had established his own international distribution company, Multi-National Corporation, learned of Atari's problems in international markets, and in 1973 introduced himself to Bushnell to help. Gordon worked on commission through his company, helping Atari sell to Europe, as well as reducing their costs by shipping only the circuit boards for their arcade games and letting local manufacturers supply the chassis and display.[28][27] John Wakefield, Atari's first president, believed that the company should own its own international distribution channels, establishing Atari Japan and Atari Pacific and Computer Games, Ltd, for Hawaii and South Korea, but these failed to gain interest and contributed to Atari's 1974 financial issues.[28] Gordon urged Bushnell to fire Wakefield due to the 1974 financials, and following that, Gordon was temporarily named president of Atari as to let go of the relatively new management staff and sell off the international sales subsidaries.[28] After Atari Japan was sold toNamco for$500,000, Namco would be the exclusive distributor of Atari's games in Japan.[24] Bushnell has claimed that deals arranged by Gordon saved Atari.[29]
Gordon further suggested that Kee Games be merged into Atari in September 1974, just ahead of the release ofTank in November of that year.Tank was a success in the arcade, and Atari was able to reestablish its financial stability by the end of 1974.[24][30] In the merger, Joe Keenan was kept on as president of Atari while Bushnell stayed as CEO.[26]
Having avoided bankruptcy, Atari continued to expand on its arcade game offerings in 1975. The additional financial stability also allowed the company to pursue new product ideas. One of these a home version ofPong, a concept that Atari had first considered as early as 1973. The cost of integrated circuits to support a home version had fallen enough to be suitable for a home console by then, and initial design work on console began in earnest in late 1974 by Alcorn, Harold Lee and Bob Brown. Atari struggled to find a distributor for the console, but eventually arranged a deal withSears to produce 150,000 units by the 1975 holiday season. Atari was able to meet Sears' order with additional$900,000 investments during 1975. The homePong console (branded as Sears Tele-Game) was a high-demand product that season, and resulted in Atari having a viable home console division in addition to their arcade division.[24] By 1976, Atari began releasing homePong consoles, includingPong variants, under their own brand name.[31] The success of homePong drew a similar range of competitors to this market, includingColeco with theirTelstar series of consoles.[24]
In 1975, Bushnell started an effort to produce a flexible video game console capable of playing all four of Atari's then-current games. Bushnell was concerned that arcade games took about$250,000 to develop and had about a 10% chance of being successful. Similarly, dedicated home consoles had cost about$100,000 to design but, with increased competition, had a limited practical shelf life of a few months. Instead, a programmable console with swappable games would be far more lucrative.[24] Development took place atCyan Engineering, which initially had serious difficulties trying to produce such a machine. However, in early 1976,MOS Technology released the first inexpensive microprocessor, the6502, which had sufficient performance for Atari's needs.[24] Atari hiredJoe Decuir andJay Miner to develop the hardware and customTelevision Interface Adaptor for this new console.[24] Their project, under the codename of "Stella", would become known as theAtari Video Computer System (Atari VCS).
Atari, as a private company under Bushnell, gained a reputation for its relaxed employee policies in areas such as formal hours and dress codes, and company-sponsored recreational activities involving alcohol,marijuana, and hot tubs.[24] Board and management meetings to discuss new ideas moved from formal events at hotel meeting rooms to more casual gatherings at Bushnell's home, Cyan Engineering, and a coastal resort inPajaro Dunes.[24][32] Dress codes were considered atypical for a professional setting, with most working in jeans and T-shirts.[32] Many of the workers hired early on to construct games werehippies who knew enough to help to solder components together and took minimal wages.[24] Several former employees, speaking in years that followed, described this as the common culture of the 1970s and not unique to Atari.[33][34]
This approach changed in 1978, afterRay Kassar was brought on fromWarner initially to help with marketing, but eventually took on a larger role in the company, displacing Bushnell and Keenan, and instituting more formal employee policies for the company.[35]
Before entering the home console market, Atari recognized they needed additional capital to support this market; the company had acquired smaller investments through 1975, but needed a larger infusion of funds.[19] Bushnell had consideredgoing public and tried to sell the company toMCA andDisney, both of whom passed. Instead, after at least six months of negotiations in 1976, Atari took an acquisition offer fromWarner Communications for$28 million that was completed in November 1976, of which Bushnell received$15 million. Bushnell remained chairman and CEO, while Keenan remained president.[24][36] Atari had about $40 million in annual revenue;[37] for Warner, the deal represented an opportunity to buoy its underperforming film and music divisions.[32] Along with Warner's purchase, Atari had established its new headquarters in the Moffett Park area inSunnyvale, California.[19]
During Atari's negotiations with Warner,Fairchild Camera and Instrument announced theFairchild Channel F, the first programmable home console that used cartridges to play different games.[38] Following the acquisition, Warner provided Atari with$120 million for Stella's development, making it possible to complete the console by early 1977.[24] The console's announcement, which took place on June 4, 1977, may have been delayed until after June 1 so that Atari could wait out the terms of the Magnavox settlement from the earlierPong patent lawsuit and would not have to disclose information on it.[19] The Atari VCS was released in September 1977.[24] Most of thelaunch titles for the console were based on Atari's successful arcade games, such asCombat, which incorporated elements of bothTank andJet Fighter.[24] Around 400,000 Atari VCS units were produced for the 1977 holiday season, but the company had lost around$25 million due to production problems that caused some units to be delivered late to retailers.[35]
In addition to the VCS, Atari continued to manufacture dedicated home console units through 1977; however, these were discontinued by 1978, with unsold stock destroyed soon after.[24] Another one-off device from the consumer products division in 1977 was theAtari Video Music, a computerized device that takes an audio input and creates graphics displays to a monitor. The unit did not sell well and was discontinued in 1978.[24]
Atari continued its arcade game line as it built up its consumer division.Breakout, released in 1976, was one of Atari's last games based ontransistor–transistor logic (TTL) discrete logic design before the company transitioned tomicroprocessors. It was engineered by futureApple Computer co-founderSteve Wozniak, based on Bushnell's concept of a single-playerPong, and used as few TTL chips as possible from an informal challenge given to Wozniak by then-Atari employee and future Apple co-founderSteve Jobs.[24]Breakout was successful and sold around 11,000 units, but Atari still struggled to meet demand. Atari exported a limited number of units to Namco via its prior Atari Japan venture, which led Namco to create its own clone of the game to meet demand in Japan, helping establish it as a major company in the Japanese video game industry. Subsequently, Atari moved to microprocessors for its arcade games such asCops 'N Robbers,Sprint 2,Tank 8, andNight Driver.[24]
Alongside continuing work in arcade game development and their preparations to launch the Atari VCS, Atari launched two more ventures in 1977. The first was the Atari Pinball division, which includedSteve Ritchie andEugene Jarvis.[39] Around 1976, Atari was concerned that arcade operators had become nervous on the prospects of future arcade games, and thus launched their own pinball machines to accompany their arcade games. Atari's pinball machines were built upon the technology principles that they had learned from arcade and home console games, usingsolid-state electronics over electro-mechanical components to make them easier to design and repair. The division released about ten different pinball units between 1977 and 1979. Many of the machines were considered to be innovative for their time, but were difficult to produce and meet distributors' demand.[24] The second new venture in 1977 was the first of thePizza Time Theatre (later known as Chuck E. Cheese), based on the pizza arcade concept that Bushnell had from the start. At this stage, Atari used the concept to bypass problems with getting their arcade games placed into arcades by effectively controlling the arcade itself while also creating a family-friendly environment. The first restaurant/arcade was launched inSan Jose in May 1977.[24]
After releasing the VCS, Atari hired more programmers to start work on a second wave of games for release in 1978. In contrast to the launch titles inspired by Atari's arcade games, the second batch of games featured more novel ideas, including some based onboard games, and were more difficult to sell.[35] Warner's Manny Gerard, who oversaw Atari, brought in formerBurlington Industries vice presidentRay Kassar to help market Atari's products. Kassar was hired in February 1978 as president of the Atari consumer division,[35] and helped develop a commercialization strategy for these games through 1978. Kassar also oversaw the creation of a new marketing campaign for the VCS, featuring multiple celebrities and the slogan "Don't watch TV tonight, play it." Kassar also instituted programs to increase production of the VCS and improvequality assurance of the console and games. As they approached the end of 1978, Atari had prepared 800,000 VCS units, but sales were languishing ahead of the holiday sales period.[35]
Kassar's influence on Atari grew throughout 1978, leading to conflict between Bushnell and Warner Communications. Among other concerns about the direction Kassar was taking the company, Bushnell cautioned Warner that they needed to continue to innovate on the home console and could not simply release games for the VCS indefinitely like a music business.[35] In a November 1978 meeting with Warner Communications, Bushnell told Gerard that they had produced far too many VCS units to be sold that season, and that Atari's consumer division would suffer a major loss. However, Kassar's marketing plan, alongside the influence of the arcade hitSpace Invaders fromTaito, led to a large surge in VCS sales, and Atari's consumer division ended the year with$200 million in sales.[35] Warner removed Bushnell as chairman and co-CEO of the company, but offered to let him stay on as a director and creative consultant; Bushnell refused and left the company. Bushnell purchased the rights for Pizza Time Theatre for$500,000 from Warner before leaving.[35] Keenan was moved to Atari's chairman, and Kassar was assigned as president after Bushnell's departure; Keenan left the company a few months later to join Bushnell in managing Pizza Time Theatre, and Kassar was promoted to CEO and chairman of Atari.[35][40]
After Bushnell's departure, Kassar implemented significant changes in the workplace culture in early 1979 to make Atari appear more professional, and cancelled several of the engineering programs that Bushnell had established. Kassar also had expressed some frustration with the programmers at Atari, and was known to have called them "spoiled brats" and "prima donnas" at times.[35]
These changes in management style led to rising tensions from the developers at Atari, who had been used to freedom in developing their titles. One example wasSuperman in 1979, one of the first movie tie-ins that had been sought by Warner to accompany the release ofthe 1978 film. Warner, through Kassar, had pressuredWarren Robinett to convert his game-in-progressAdventure from a generic adventure game to aSuperman-themed title. Robinett refused, but nonetheless helped fellow programmerJohn Dunn develop the conversion after he volunteered.[35] Furthermore, after Warner refused to let Atari include programmer credits into game manuals for fear that competitors may try to hire them away, Robinett secretly stuck his name intoAdventure, marking one of the first knownEaster eggs, to bypass this issue.[35] The transition from Bushnell to Kassar led to a large number of departures from the company over the next few years.[40] Four programmers —David Crane,Bob Whitehead,Larry Kaplan, andAlan Miller — whose games had contributed collectively to over 60% of Atari's game sales in 1978, left the company in mid-1979 after requesting and being denied additional compensation for their performance; they formedActivision in October of that year to make their own Atari VCS games based on their knowledge of the console.[35] Similarly,Rob Fulop, who programmed the arcade conversion ofMissile Command for the VCS in 1981 that sold over 2.5 million units, received only a minimal bonus that year, and left with other disgruntled Atari programmers to formImagic in 1981.[35]
In 1979, the Atari coin-op division began releasing arcade games incorporatingvector graphics displays after the success of theCinematronics gameSpace Wars in 1977. Their first vector graphics game,Lunar Lander, was a modest success, but their second arcade title,Asteroids, was highly popular, displacingSpace Invaders as the most popular game in the United States.[35] Atari produced over 70,000Asteroids cabinets, and made an estimated$150 million from sales.[41]Asteroids, along withSpace Invaders, helped usher in thegolden age of arcade video games, which lasted until around 1983; Atari contributed several more games that were considered part of this golden age, includingMissile Command,Centipede, andTempest.[42][43]
Work on a successor to the Atari VCS began shortly after the system was introduced in mid-1977. The original development team, which included Meyer, Miner and Decuir, estimated that the VCS had a lifespan of about three years, and decided to build the most powerful machine they could when given that time frame. They set a goal to be able to support concurrent arcade games, as well as features ofpersonal computers such as theApple II.[35] The project resulted in the first home computers from Atari, theAtari 800 and 400, both launched in 1979. These systems were mostlyclosed systems, and most of the initial games were developed by Atari, drawing from programmers from the VCS line.[35] Sales into early 1980 were poor, and there was little to distinguish the computer line from the console products of the time. In March 1980, the company releasedStar Raiders, a space combat game developed byDoug Neubauer based on theStar Trek game that had been popular on mainframe computers.Star Raiders became the Atari 400/800's system seller, but its success emphasized the lack of software for the computers due to the system's closed nature and the limited rate at which Atari's programmers could produce titles.[35] Third-party programmers found means to get technical information about the computer specifications either directly from Atari employees or fromreverse engineering. By late 1980, third-party applications and games began to emerge for the 8-bit computer family, and the specialized magazineANALOG Computing was established for Atari programmers to share programming information. While Atari did not formally release development information, they supported this external community by launching theAtari Program Exchange (APX) in 1981, a mail-order service through which programmers could offer their applications and games to other users of Atari's 8-bit computers.[35] By this point, Atari's computers were facing new competition from theVIC-20.[35]
A short-lived Atari Electronics division was created to makeelectronic games, and ran from 1979 to 1981. They successfully released one product: a handheld version of Atari's arcade gameTouch Me, which played similar toSimon, in 1979. The division began work onCosmos, a system that was to combine LED lights and a holographic screen. Atari had promoted the game at the 1981 CES, but opted not to follow through on releasing it following Alcorn's departure in 1981, and closed down the Electronics division.[35][44]
Moving into 1980, the VCS still lacked a system-selling game. AfterSpace Invaders had hit arcades in 1979, Warner instructed Kassar to try to get the rights to ahome conversion for the game from Taito; around this time, Rick Maurer had already begun prototype work for a possible game on his own. Once Kassar has secured the rights, Maurer was able to transfer his work to a form for the VCS, andSpace Invaders for the VCS was released in March 1980. The game became the VCS's"killer app", helping sell the console alongside the game, and made Atari an estimated$100 million. It also set a roadmap for future game releases on the VCS under Kassar, with more scheduled release plans throughout the year and Atari looking for more licensed arcade conversions and tie-in media.[35]
Until 1980, the Atari VCS was the only major programmable console on the market, and Atari the only supplier for its games; that same year, however, Atari began to experience its first major competition asMattel Electronics brought theIntellivision to market.[16] Around this time, Activision also released its first set of third-party games for the Atari VCS.[35] Atari took legal action against Activision, first by trying to tarnish the company's reputation, then by accusing Activision's four programmers of stealing trade secrets and violatingnon-disclosure agreements. This lawsuit was eventually settled out of court in 1982, with Activision agreeing to pay a small license fee to Atari for every game sold. This effectively validated Activision's development model and made it the firstthird-party developer in the video game industry.[45][46]
In 1980, Namco produced the arcade gamePac-Man, which reached the United States market by the end of the year.Pac-Man soon became a nationwide success, surpassing the popularity ofAsteroids and creating a wave of "Pac-Mania".[47] Atari was able to secure an exclusive deal with Namco to convertPac-Man to home systems, starting with the Atari VCS version.[48] Atari management believed that the game would be a surefire hit in the same manner asSpace Invaders,[49] but the game exceeded the hardware capabilities of the VCS. WhileTod Frye was able to get a version ofPac-Man on the VCS within the system's limitations, the resulting game was critically panned for technical issues, such as the excessive flickering of theghosts.[48]Pac-Man was released in March 1982, with Atari running several promotions to increase sales. It sold over seven million units and ultimately was the best-selling VCS game, bringing in over$200 million. However, due to its poor technical implementation, the game led many consumers to be more cautious on rushing to purchase new games in the future, and tarnished Atari's image at a time when the company was trying to compete against low-quality third-party titles that were starting to flood the market.[49]
In 1981, Atari discovered thatGeneral Computer Corporation (GCC) had developed hardware that could be installed onto arcade games to give operators additional options to modify the game, such as theirSuper Missile Attack board, which modified Atari'sMissile Command. Atari initially filed suit to stop GCC's products, but as they learned more about their products, they recognized that GCC had talented engineers, as one of their other products, a modification board forPac-Man, was sold back to Midway and eventually became the basis ofMs. Pac-Man. Atari settled with GCC out of court and brought the company on in a consulting position. GCC developed arcade and VCS games for Atari, and also programmed most of the games for the upcomingAtari 5200 system.[35]
Atari launched its second major programmable console, the Atari 5200, in late 1982. It was based on the same design features that had gone into the Atari 800 and Atari 400 computers, but repackaged as a home console. Alongside the 5200's release, Atari announced that it would rebranding the Atari VCS as the Atari 2600 to create a more consistent product naming system.[50] The Atari 5200 did not do well on the market, as it lackedbackward compatibility with Atari VCS/2600 cartridges, a feature offered by theColecoVision. The Atari 5200 only sold about a million units before it was discontinued in 1984.[50]
By the end of 1982, Atari had hired 4,000 additional employees for a total of 10,000 across its three divisions, each of which focused on arcade games, consumer home consoles, and home computers. The company had more than fifty facilities in theSilicon Valley area. For the first nine months of 1982, Atari contributed half of Warner's$2.9 billion revenue and a third of their$471 million operating profit.[51] However, at the same time, the company was seeing a high rate of turnover in management positions, which Kassar attributed to the rapid growth of the company.[51] As an industry, the video game market reached about$1.7 billion in 1982 and was expected to reach$3 billion in 1984, rivalling revenues of the film industry, and making video games an overall lucrative prospect.[52]
In October 1981, in an attempt to remain competitive against Mattel's Intellivision, Atari requested all of its distributors to commit to orders for home console games in 1982, so as to allow the company to anticipate production numbers and meet expected demand. Distributors expected Atari's games to do well and ordered in large volumes, placing more orders than expected given Atari's past failures to meet demand.[53][51] By the middle of 1982, a new home console marketplace had appeared, which one distributor called "a totally different business".[51] In addition to Mattel,Coleco had introduced theColecoVision, which shipped in August 1982 with an arcade conversion of the popularDonkey Kong as a pack-in game, as well as add-ons that could play Atari 2600 games.[53] Further, Activision, Imagic, along with other third-party game developers likeParker Brothers, had begun releasing Atari 2600 titles that rivaled Atari's own games, reducing its market share of games to 40%.[51][54] Distributors began cancelling the Atari orders they had placed the prior year, which Gerard said they were "blind-sided" by, having never faced this type of competition before.[53][51]
Additionally, around October 1981, Atari looked to other licensed properties for games. They secured the rights forRaiders of the Lost Ark in late 1981, shortly after the release ofthe blockbuster film earlier that year.[55] Similarly, after the filmE.T. the Extra-Terrestrial was released in June 1982, Warner chairman Steve Ross negotiated directly with directorSteven Spielberg to secure video game rights, estimated to have cost Atari$20−25 million, to makea video game based on the film. The game was programmed byHoward Scott Warshaw over a period of five weeks in advance of the 1982 holiday season.[56]Raiders andE.T. were released in November and December 1982, respectively. As distributors had already cancelled orders, these and other games began to stockpile in Atari's warehouses without any sellers.[53] Neither game sold as much as Atari had expected.[51] Notably,E.T. was critically panned and later became known asone of the worst games ever made. Despite selling 2.6 million copies in 1982, it suffered massive returns in 1983, making it a financial failure.[57]
In December 1982, Warner Communications announced that it expected significant decline in investor earnings of about 40% for the fourth quarter of the year, mostly as a result of slower game sales from Atari.[51] Warner still remained confident that it would see a 10 to 15% growth through 1982, which it considered fair given theearly 1980s recession.[51] However, earlier in 1982, Warner had expected a 50% growth and used Atari's profits to help support its other media subsidiaries,[58][59] and analysts were less confident in Warner's current outlook; one asked, "Why did it happen so quickly? And why were they not in tune with it while it was building?"[51] Later that month, Warner announced that Kassar, along with one other Atari executive, had sold numerous shares of Warner stock prior to the investor announcement and were engaged withinsider trading.[60] TheSecurities and Exchange Commission (SEC) investigated Kassar's sale and, in September 1983, fined Kassar about$81,000.[61] Kassar signed a consent agreement neither admitting nor denying the charges.[62]
Atari's financial troubles continued into the first quarter of 1983, with an operating loss of$45.6 million compared to an operating profit of$100 million in the same quarter in 1982.[63] Atari was still struggling with excess inventory of its Atari 2600 games,[63][64][65] and the Atari 5200 had not been as successful as the 2600.[66] The golden age of arcade games was waning, and the arcade division was failing to turn a profit.[63] Furthermore, Atari's venture into home computers was not as successful, as they were losing aprice war withCommodore International.[67]
Atari had gained a poor reputation in the industry. One dealer toldInfoWorld in early 1984 that "It has totally ruined my business ... Atari has ruined all the independents." A non-Atari executive stated, "There were so many screaming, shouting, threatening dialogues, it's unbelievable that any company in America could conduct itself the way Atari conducted itself. Atari used threats, intimidation and bullying. It's incredible that anything could be accomplished. Many people left Atari. There was incredible belittling and humiliation of people. We'll never do business with them again."[68] In early 1984,John J. Anderson wrote that "Atari has never made a dime in microcomputers [...] Many of the people I spoke to at Atari between 1980 and 1983 had little or no idea what the products they were selling were all about, or who if anyone would care. In one case, we were fed mis- and disinformation on a frighteningly regular basis, from a highly-placed someone supposedly in charge of all publicity concerning the computer systems. And chilling as the individual happenstance was, it seems to have been endemic at Atari at the time."[66]
Despite these losses, Atari remained the number one console maker in every market except Japan, whereNintendo had released its first programmable video game console, theFamily Computer, on July 15, 1983. Looking to sell the console in international markets that same year, Nintendo offered a licensing deal in which Atari would build and sell the system while paying Nintendo a royalty. The deal was in the works throughout 1983,[69] and the two companies tentatively decided to sign the agreement at the June 1983Consumer Electronics Show. However, it was at that same show that Coleco demonstrated its newAdam computer with Nintendo'sDonkey Kong. Kassar was furious, as Atari owned the exclusive rights to publishDonkey Kong for computers, which he accused Nintendo of violating. Nintendo, in turn, criticized Coleco, which only owned the console rights to the game;[70] Coleco, however, had legal grounds to challenge the claim, since Atari had only purchased the floppy disk rights to the game, while the Adam version was cartridge-based.[71] Negotiations became protracted after Kassar's departure from Atari in mid-1983. With any deal unlikely to be realized before year-end sales, Nintendo dropped out and later worked through their Nintendo of America subsidiary to release the console, now known as theNintendo Entertainment System, on their own in 1985.[72][73]
In 1983, Atari set up Studio Games, a partnership with MCA Videogames (a division ofMCA Inc.), which gave them access to properties handled by MCA's sister studioUniversal Pictures.[74]
Kassar eventually resigned as CEO of Atari in July 1983 over mounting financial losses; Warner replaced him withJames J. Morgan, a vice president fromPhilip Morris Inc.[63] Stating that "one company can't have seven presidents", Morgan stated a goal of more closely integrating the company's divisions to end "the fiefdoms and the politics and all the things that caused the problems".[75] Morgan implemented processes to reduce operating costs at Atari, including laying off about 3,000 jobs and moving 4,000 more manufacturing positions to Asia.[76][59]
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Atari's financial problems continued throughout the rest of 1983, with second quarter losses of$310 million.[77] In September 1983, the company discreetly buried about 700,000 units of its unsold stock ina landfill nearAlamogordo, New Mexico; this event became part of anurban legend that millions of unsold cartridges, mostly ofE.T., were buried there.[78][79][80]
In the United States, Atari's problems reverberated across the entire game industry, as consumer confidence in video games had weakened significantly, contributing significantly to thevideo game crash of 1983.[81] Retailers became wary of selling video games, making it difficult for console and video game manufacturers to sell their products.[65] Furthermore, the rising popularity of home computers drove sales away from game consoles.[16] To clear stock as to make way to new games, retailers also heavily discounted consoles and games, which also hurt these companies financially. Many of the new companies that had sprung up to take advantage of the rising growth of video games prior to 1983 shut down, liquidating their assets and further contributing to the excess unsold stock.[16] Established companies like Atari faced difficulty in selling their products against these volumes, which further contributed to their losses.[16] By the end of 1983, Atari reported a total loss of$538 million, compared to the$1.7 billion operating profit in 1982.[59][16]
Despite its financial issues, Atari continued to innovate. In March 1983, it established the Ataritel division to develop telephones with screens and computer features with consumer-ready products to reach market by 1984.[82] In October 1983, Atari created itsAtarisoft division, which produced software from its own library for its rival systems, including for computers from Commodore, Apple,Texas Instruments, andIBM, as well as console games for ColecoVision.[83] GCC, inspired by the Atari 2600 add-ons available for the ColecoVision and Atari 5200, began work on designing a new console that would be more advanced than the 2600 while still support direct compatibility with its games. The result of this project was theAtari 7800 ProSystem, which was announced in early 1984. Morgan had shut down the Atari 5200 production towards Atari 7800 manufacturing for its mid-1984 release, but with Warner's sale of the company in June 1984, the launch was cancelled. The Atari 7800 was later launched underAtari Corporation in May 1986.[73]
By the end of 1983, Warner's stock price slid from $60 to $20, and the company began searching for a buyer for Atari.[59] WhenTexas Instruments exited the home-computer market in November 1983 due to its price war with Commodore, many believed that Atari would be next.[68][67] ItsAtarisoft games for rival computers sold well,[84] and a rumor stated that Atari planned to discontinue hardware and only sell software.[66] Morgan stated that he expected to bring Atari back to profitability by mid-1984, but warned that he was expecting more losses for the first six months of the year.[85]
On July 3, 1984, in a surprise announcement, Warner announced that they had sold off the assets of theconsumer electronics and home computer divisions of Atari, which included the console and computer production, game development, and Atarisoft divisions, to former Commodore International CEOJack Tramiel in exchange for taking on roughly$240 million in debt held by Warner. Tramiel merged these assets into his own Tramel Technology Limited, which he renamedAtari Corporation. In the transition, Morgan was given "a leave of several months", with Tramiel's son Sam Tramiel and his other aides already taking leadership of the company. Warner renamed Atari, Inc. toAtari Games, which now primarily consisted of the coin-operated games, arcade operations, and Ataritel divisions.[59] Ataritel was sold toMitsubishi later in 1984; Mitsubishi released one of the first digital videophones based on Atari's original designs under the brand Lumaphone by 1986.[86]
Under Tramiel, Atari Corporation initially focused heavily on home computers before it revisited game consoles, including theAtari 2600 Jr., a redesign of the Atari 2600. However, it eventually dropped out of the hardware market by 1996, following the failure of itsAtari Jaguar console.[59][16] In 1998, Atari Corporation's properties were acquired byHasbro Interactive; in 2001, they were sold to Infogrames, which would rebrand itself asAtari SA, and held most of theintellectual property rights to the console games developed by Atari, Inc.
In 1985, Warner created a new joint venture withNamco, subsequently named Atari Games Corporation, and transferred the coin-operated games division to the new entity. Namco owned the majority stake in Atari Games Corporation, while Warner retained a 40% share. Namco later lost interest in operating Atari Games and sold 33% of its shares to a group of employees led by then-president Hideyuki Nakajima in 1986. As the company was now split between Warner (40%), Namco (40%), and the employees (20%), and none of them held a controlling share, Atari Games effectively became an independent company.[87] The company re-entered home console publishing as well, but were unable to use the Atari name in the home market as the rights were held by Atari Corporation; to resolve this issue, they launched theTengen subsidiary for console publishing. In 1994,Time Warner, as it had become known following its merger withTime Inc., bought out Namco's share of Atari Games, placing it under their newTime Warner Interactive label. After only two years, it was sold again toWMS Industries in 1996, and made part ofMidway Games when that company was spun off as an independent company in 1998 as the Midway Games West studio. The studio was disbanded in 2003, marking the end of the last remaining part of the original Atari. The Atari Games library was retained by Midway until 2009, when Midway was sold toWarner Bros. Interactive Entertainment amidst financial troubles.
Atari's software is organized by platform:
Yamauchi demanded that Coleco refrain from showing or selling Donkey Kong on the Adam Computer, and Greenberg backed off, though he had legal grounds to challenge that demand. Atari had purchased only the floppy disk license, the Adam version of Donkey Kong was cartridge-based.
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![Atari's first wordmark, as seen in the first print ad for Pong, in a 1973 issue of Cash Box[1]](/mt/?noimg=&dark=on&url=https%3a%2f%2fen.wikipedia.org%2fwiki%2fFile%3aAtari_first_logo_1973.svg){kind=logo}
