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{{Wikipedia}} {{Cleanup-rewrite}} {{Decadebox}} {{VG History|expandmenu=1}} The '''video game crash of 1983''' (known as the '''Atari shock''' in [[Japan]]) was a large-scale [[recession]] in the [[video game industry]] that occurred from 1983 to 1985, primarily in [[United States of America|America]]. The crash was attributed to several factors, including [[market saturation]] in the number of game consoles and available games, and waning interest in console games in favor of personal computers. Revenues peaked at around $3.2 billion in 1983, then fell to around $100 million by 1985 (a drop of almost 97 percent). The crash was a serious event which abruptly ended what is retrospectively considered the [[Second generation of video game consoles|second generation]] of [[console game|console video gaming]] in North America. Lasting about two years, the crash shook the then-booming industry, and led to the bankruptcy of several companies producing [[home computer]]s and [[video game console]]s in the region. Analysts of the time expressed doubts about the long-term viability of [[video game console]]s and software. The North American video game console industry eventually recovered a few years later, mostly due to the widespread success of the [[Nintendo Entertainment System]] (NES) in [[1985 in video gaming|1985]]; Nintendo designed the NES as the Western branding for its Famicom console originally released in 1983 in order to avoid the missteps which caused the 1983 crash and avoid the stigma which video games had at that time. ==Causes and factors== [[File:Atari-2600-Wood-4Sw-Set.jpg|thumb|Atari VCS, the most popular console prior to the crash.]] ===Prior history=== Prior to 1982, the most significant home console was the [[Atari 2600|Atari VCS]] (renamed the Atari 2600 in late 1982). The Atari VCS was launched in 1977, but in its first few years, had modest sales. In 1980, Atari's licensed version of ''[[Space Invaders (arcade game)|Space Invaders]]'' from [[Taito]] became the console's [[killer application]]; sales of the Atari VCS quadrupled, and the game was the first title to sell more than a million copies.<ref>{{Cite book |title=Ultimate History of Video Games |first=Steven |last=Kent |page=190 |publisher=[[Three Rivers Press]] |isbn=0-7615-3643-4 |year=2001}}</ref><ref>{{Cite book |last=Weiss |first=Brett |title=Classic home video games, 1972–1984: a complete reference guide |year=2007 |publisher=[[McFarland & Company|McFarland]] |location=Jefferson, N.C. |isbn=0-7864-3226-8 |page=108}}</ref> ===Flooded console market=== Spurred by the success of the Atari VCS, other consoles were introduced, both from Atari and other companies: [[Atari 5200]], [[ColecoVision]], [[Magnavox Odyssey²]] and [[Intellivision]]. In addition to this, Mattel and Coleco created devices that allowed them to play Atari 2600 games on their consoles. Each of these consoles had its own library of games produced by the console maker, and many had large libraries of games produced by third-party developers. In 1982, analysts noticed trends of saturation, mentioning that the amount of new software coming in will only allow a few big hits, that retailers had too much floor space for systems, and that price drops for home computers could result in an industry shakeup.<ref>Jones, Robert S. (Dec 12, 1982). "Home Video Games Are Coming Under a Strong Attack". ''[[The Gainesville Sun|Gainesville Sun]]''. Retrieved from https://news.google.com/newspapers?nid=1320&dat=19821212&id=L2tWAAAAIBAJ&sjid=q-kDAAAAIBAJ&pg=1609,4274079&hl=en</ref> In addition, the rapid growth of the video game industry led to an increased demand for video games, but which the manufacturers over-projected. An analyst for [[Goldman Sachs]] had stated in 1983 that the demand for video games was up 100% from 1982, but the manufacturing output increased by 175%, creating a surplus in the market.<ref name="nytimes 1983"/> [[Raymond Kassar]], the CEO of Atari, had recognized in 1982 that there would become a point of saturation for the industry, but did not expect this to occur until about half of American households had a video game console; at the time, only about 15 million machines had been sold, far below this expected point.<ref name="nytimes 1983"/> ===Competition from home computers=== {{See also|History of personal computers}} [[File:Commodore-64-Computer-FL.jpg|thumb|right|The [[Commodore 64]] survived the crash and went on to become one of the best selling computers of all time.]] In 1979, Atari unveiled the Atari 400 and 800 computers, built around a chipset originally meant for use in a game console, and which retailed for the same price as their respective names. In 1981, [[IBM]] introduced the [[IBM 5150]] PC with a $1,565 base price<ref name="ibmpc25">{{Cite web|url=http://www-03.ibm.com/ibm/history/exhibits/pc25/pc25_birth.html|title=IBM Archives: The birth of the IBM PC|date=January 23, 2003|publisher=|deadurl=no|archiveurl=https://web.archive.org/web/20140102212336/http://www-03.ibm.com/ibm/history/exhibits/pc25/pc25_birth.html|archivedate=January 2, 2014|df=mdy-all}}</ref> ({{Inflation|US|1565|1981|fmt=eq}}), while [[Sinclair Research]] introduced its low-end [[ZX81]] microcomputer for [[GBP|£]]70 ({{Inflation|UK|70|1981|fmt=eq|cursign=£}}). By [[1982 in video gaming|1982]], new desktop computer designs were commonly providing better color graphics and sound than game consoles and personal computer sales were booming. The [[Texas Instruments TI-99/4A|TI 99/4A]] and the [[Atari 8-bit family|Atari 400]] were both at $349 ({{Inflation|US|349|1982|fmt=eq}}), the [[Tandy Color Computer]] sold at $379 ({{Inflation|US|379|1982|fmt=eq}}), and [[Commodore International]] had just reduced the price of the [[Commodore VIC-20|VIC-20]] to $199 ({{Inflation|US|199|1982|fmt=eq}}) and the [[Commodore 64|C64]] to $499 ({{Inflation|US|499|1982|fmt=eq}}).<ref name="Ahl">Ahl, David H. (1984 November). [http://www.atarimagazines.com/creative/v10n11/30_The_first_decade_of_perso.php The first decade of personal computing] {{webarchive|url=https://web.archive.org/web/20161210124312/http://www.atarimagazines.com/creative/v10n11/30_The_first_decade_of_perso.php |date=December 10, 2016 }}. ''Creative Computing'', vol. 10, no. 11: p. 30.</ref><ref>{{Cite web|url=http://www.westegg.com/inflation/infl.cgi|title=The Inflation Calculator|publisher=|deadurl=no|archiveurl=https://web.archive.org/web/20180326173743/https://westegg.com/inflation/infl.cgi|archivedate=March 26, 2018|df=mdy-all}}</ref> Because computers generally had more [[Computer storage|memory]] and faster [[central processing unit|processors]] than a console, they permitted more sophisticated games. A 1984 compendium of reviews of Atari 8-bit software used 198 pages for games compared to 167 for all other software types.<ref name="aw1984">{{Cite book |url=https://archive.org/stream/Atari_Software_1984#page/n3/mode/2up |title=The Addison-Wesley Book of Atari Software 1984 |publisher=Addison-Wesley |author1=Stanton, Jeffrey |author2=Wells, Robert P. |author3=Rochowansky, Sandra |author4=Mellin, Michael |pages=TOC |isbn=020116454X}}</ref> Home computers could also be used for tasks such as [[word processing]] and home accounting. Games were easier to distribute, since they could be sold on [[floppy disk]]s or [[cassette tape]]s instead of [[Read-Only Memory|ROM]] cartridges. This opened the field to a [[cottage industry]] of third-party software developers. Writeable storage media allowed players to save games in progress, a useful feature for increasingly complex games which was not available on the consoles of the era. In 1982, a price war began between Commodore and Texas Instruments, and home computers became as inexpensive as video-game consoles;<ref name="pollack19830619">{{Cite news |url=https://www.nytimes.com/1983/06/19/business/the-coming-crisis-in-home-computers.html?pagewanted=all |title=The Coming Crisis in Home Computers |work=The New York Times |date=June 19, 1983 |accessdate=January 19, 2015 |author=Pollack, Andrew |deadurl=no |archiveurl=https://web.archive.org/web/20150120040951/http://www.nytimes.com/1983/06/19/business/the-coming-crisis-in-home-computers.html?pagewanted=all |archivedate=January 20, 2015 |df=mdy-all }}</ref> after Commodore cut the retail price of the 64 to $300 in June 1983 some stores began selling it for as little as $199.{{R|mitchell19830906}} [[Dan Gutman]], founder in 1982 of ''Video Games Player'' magazine, recalled in 1987 that "People asked themselves, 'Why should I buy a video game system when I can buy a computer that will play games and do so much more?'"{{R|gutman198712}} ''[[The Boston Phoenix]]'' stated in September 1983 about the cancellation of the [[Intellivision III]], "Who was going to pay $200-plus for a machine that could only play games?"<ref name="mitchell19830906">{{Cite news |url=https://news.google.com/newspapers?id=gn0hAAAAIBAJ&sjid=tYoFAAAAIBAJ&pg=5584%2C3561802 |title=A summer-CES report |work=Boston Phoenix |date=September 6, 1983 |accessdate=January 10, 2015 |author=Mitchell, Peter W. |pages=4}}</ref> Commodore explicitly targeted video game players. Spokesman [[William Shatner]] asked in VIC-20 commercials "Why buy just a video game from Atari or Intellivision?", stating that "unlike games, it has a real computer keyboard" yet "plays great games too".<ref name="cbmtvad">{{Cite AV media |url=https://www.youtube.com/watch?v=UK9VU1aJvTI |title=Commodore VIC-20 ad with William Shatner |date=June 9, 2010 |deadurl=no |archiveurl=https://web.archive.org/web/20170406170423/https://www.youtube.com/watch?v=UK9VU1aJvTI |archivedate=April 6, 2017 |df=mdy-all }}</ref> Commodore's ownership of chip fabricator [[MOS Technology]] allowed manufacture of [[integrated circuit]]s in-house, so the VIC-20 and C64 sold for much lower prices than competing home computers. "I've been in retailing 30 years and I have never seen any category of goods get on a self-destruct pattern like this", a [[Service Merchandise]] executive told ''The New York Times'' in June 1983.{{R|pollack19830619}} The price war was so severe that in September Coleco CEO [[Arnold Greenberg]] welcomed rumors of an [[IBM PCjr|IBM 'Peanut']] home computer because "IBM is a company that knows how to make money". "I look back a year or two in the videogame field, or the home-computer field", Greenberg added, "how much better everyone was, when most people were making money, rather than very few".<ref name="coleco19830928b">{{Cite AV media |url=https://www.youtube.com/watch?v=gg_I9TGYM-w |title=Coleco Presents The Adam Computer System |date=May 3, 2016 |publisher=YouTube |orig-year=1983-09-28 |time=1:06:55 |quote=IBM is just not another strong company making a positive statement about the home-computer field's future. IBM is a company that knows how to make money. IBM is a company that knows how to make money in hardware, and makes more money in software. What IBM can bring to the home-computer field is something that the field collectively needs, particularly now: A respect for profitability. A capability to earn money. That is precisely what the field needs ... I look back a year or two in the videogame field, or the home-computer field, how much better everyone was, when most people were making money, rather than very few were making money. |deadurl=no |archiveurl=https://web.archive.org/web/20170103132547/https://www.youtube.com/watch?v=gg_I9TGYM-w |archivedate=January 3, 2017 |df=mdy-all }}</ref> Companies reduced production in the middle of the year because of weak demand even as prices remained low, causing shortages as sales suddenly rose during the Christmas season;<ref name="rosenberg19831208">{{Cite news |title=Home Computer? Maybe Next Year |last=Rosenberg |first=Ronald |date=1983-12-08 |work=The Boston Globe}}</ref> only the Commodore 64 was widely available, with an estimated more than 500,000 computers sold during Christmas.<ref name="nyt19831210">{{Cite news |url=https://www.nytimes.com/1983/12/10/business/under-1983-christmas-tree-expect-the-home-computer.html |title=Under 1983 Christmas Tree, Expect the Home Computer |date=1983-12-10 |work=The New York Times |access-date=2017-07-02 |language=en-US |issn=0362-4331 |deadurl=no |archiveurl=https://web.archive.org/web/20171107112231/http://www.nytimes.com/1983/12/10/business/under-1983-christmas-tree-expect-the-home-computer.html |archivedate=November 7, 2017 |df=mdy-all }}</ref> The 99/4A was such a disaster for TI, that the company's stock immediately rose by 25% after the company discontinued it and exited the home-computer market in late 1983.<ref name="ap19831101">{{Cite news |title=IBM's Peanut Begins New Computer Phase |date=November 1, 1983 |work=The Boston Globe |agency=Associated Press}}</ref> [[JC Penney]] announced in December 1983 that it would soon no longer sell home computers, because of the combination of low supply and low prices.<ref name="bg19831217">{{Cite news |title=Penney Shelves its Computers |date=1983-12-17 |work=The Boston Globe}}</ref> By that year, Gutman wrote, "Video games were officially dead and computers were hot". He renamed his magazine ''Computer Games'' in October 1983, but "I noticed that the word ''games'' became a dirty word in the press. We started replacing it with ''simulations'' as often as possible". Soon "The computer slump began ... Suddenly, everyone was saying that the home computer was a fad, just another hula hoop". ''Computer Games'' published its last issue in late 1984.<ref name="gutman198712">{{Cite news |url=https://archive.org/stream/COMPUTEs_Apple_Applications_Vol._5_No._2_Issue_6_1987-12_COMPUTE_Publications_US#page/n65/mode/2up |title=The Fall And Rise of Computer Games |work=Compute!'s Apple Applications |date=December 1987 |accessdate=August 18, 2014 |author=Gutman, Dan |pages=64}}</ref> In 1988, ''[[Computer Gaming World]]'' founder Russell Sipe noted that "the arcade game crash of 1984 took down the majority of the computer game magazines with it." He stated that, by "the winter of 1984, only a few computer game magazines remained," and by the summer of 1985, ''Computer Gaming World'' "was the only 4-color computer game magazine left."<ref>http://www.cgwmuseum.org/galleries/issues/cgw_50.pdf#page=7 {{webarchive|url=https://web.archive.org/web/20160418152038/http://www.cgwmuseum.org/galleries/issues/cgw_50.pdf |date=April 18, 2016 }}</ref> ===Inflation=== The U.S. game industry lobbied in Washington, D.C. for a smaller $1 coin, closer to the size of a quarter, arguing that inflation (which had reduced the quarter's spending power by a third in the early 1980s) was making it difficult to prosper.<ref name=cernylong>{{Cite web |url=http://www.gamasutra.com/view/news/196403/Video_Sonys_Mark_Cerny_gives_the_long_view_of_the_game_industry.php |author=Mark Cerny |title=The Long View |publisher=[[Game Developers Conference]] |deadurl=no |archiveurl=https://web.archive.org/web/20130721161854/http://www.gamasutra.com/view/news/196403/Video_Sonys_Mark_Cerny_gives_the_long_view_of_the_game_industry.php |archivedate=July 21, 2013 |df=mdy-all }}</ref> During the 1970s, the dollar coin in use was the [[Eisenhower dollar]], a large coin impractical for vending machines. The [[Susan B. Anthony dollar]] was introduced in 1979, and its size fit the video game manufacturers' demands, but it was a failure with the general public. Ironically, the new coin's similarity to the quarter was one of the most common complaints. In Canada, existing dollar bills were removed from circulation and [[loonie|replaced with coins]] in 1987. Arcade machines in Japan had standardized the use of [[100 yen coin|¥100 coins]], worth roughly $1, which industry veteran [[Mark Cerny]] proposed as a reason for the stability of the game industry in Japan,<ref name=cernylong /> where the crash was known as the "Atari shock".<ref name=downmany>{{Cite web |url=http://sh.diva-portal.org/smash/get/diva2:213024/FULLTEXT01.pdf |title=Down Many Times, but Still Playing the Game: Creative Destruction and Industry Crashes in the Early Video Game Industry 1971-1986 |deadurl=no |archiveurl=https://web.archive.org/web/20140501201148/http://sh.diva-portal.org/smash/get/diva2:213024/FULLTEXT01.pdf |archivedate=May 1, 2014 |df=mdy-all }}</ref> ===Loss of publishing control=== In [[1979 in video gaming|1979]], [[Activision]] became the industry's first [[third-party developer]].{{R|mj19821226}}It was founded by Atari [[game programmer|programmers]] who left the company because Atari did not allow credits to appear on their games and did not pay employees a royalty based on sales. At the time, Atari was owned by [[Warner Communications]], and the developers felt that they should receive the same recognition that musicians, directors, and actors got from Warner's other divisions. After Activision went into business, Atari quickly sued to block sales of Activision's products, but failed to secure a [[restraining order]] and ultimately settled the case in [[1982 in video gaming|1982]].<ref>{{Cite news |url=https://www.forbes.com/forbes/2009/0202/052.html |work=Forbes |first=Peter C. |last=Beller |title=Activision's Unlikely Hero |date=February 2, 2009 |deadurl=no |archiveurl=https://web.archive.org/web/20170806105646/https://www.forbes.com/forbes/2009/0202/052.html |archivedate=August 6, 2017 |df=mdy-all }}</ref> This court case legitimized third-party development, encouraging companies such as [[Quaker Oats]] (with their [[US Games]] division) to rush to open video-game divisions, hoping to impress both stockholders and consumers. Until 1982, few third-party console games existed other than Activision's. [[Imagic]] and [[Games by Apollo]] demonstrated their own 2600 cartridges in January 1982, and Coleco announced several 2600 and [[Intellivision]] games. [[Parker Brothers]], CBS Video Games, and [[Mattel]] also announced 2600 cartridges at the February [[Toy Fair]], and Coleco announced the [[ColecoVision]]. At the Summer 1982 [[Consumer Electronics Show]], 17 companies including [[MCA Inc.]] and [[20th Century Fox|Fox Video Games]] announced 90 new Atari games.<ref name="goodman1983spring">{{Cite magazine |last=Goodman |first=Danny |author-link=Danny Goodman |date=Spring 1983 |title=Home Video Games: Video Games Update |url=http://www.atarimagazines.com/cva/v1n1/vgupdate.php |magazine=Creative Computing Video & Arcade Games |page=32 |deadurl=no |archiveurl=https://web.archive.org/web/20171107020633/http://www.atarimagazines.com/cva/v1n1/vgupdate.php |archivedate=November 7, 2017 |df=mdy-all }}</ref> By 1983, an estimated 100 companies were vying to get a foothold in the video game market.<ref name="nytimes 1983"/> The new companies reduced Atari's share of the cartridge-game market from 75% in 1981 to less than 40% in 1982.<ref>{{Cite news|last=Rosenberg|first=Ron|title=Competitors Claim Role in Warner Setback|url=https://pqasb.pqarchiver.com/boston/access/666912291.html?FMT=ABS&FMTS=ABS:FT&type=current&date=Dec+11%2C+1982&author=Ron+Rosenberg+Globe+Staff&pub=Boston+Globe+%28pre-1997+Fulltext%29&desc=COMPETITORS+CLAIM+ROLE+IN+WARNER+SETBACK&pqatl=google|accessdate=March 6, 2012|newspaper=[[The Boston Globe]]|date=December 11, 1982|page=1|deadurl=no|archiveurl=https://web.archive.org/web/20121107073803/http://pqasb.pqarchiver.com/boston/access/666912291.html?FMT=ABS&FMTS=ABS:FT&type=current&date=Dec+11%2C+1982&author=Ron+Rosenberg+Globe+Staff&pub=Boston+Globe+%28pre-1997+Fulltext%29&desc=COMPETITORS+CLAIM+ROLE+IN+WARNER+SETBACK&pqatl=google|archivedate=November 7, 2012|df=mdy-all}}</ref> [[David Crane (programmer)|David Crane]], one of the founders of Activision after leaving Atari, recalled that during the six months between two consecutive Consumer Electronic Shows, the number of third-party developers jumped from 3 to 30. Attempting to imitate Activision, the new companies attempted to use programmers unfamiliar with game development to produce, Crane said, "the worst games you can imagine".<ref name=aa20160509>{{Cite web |url=http://www.arcadeattack.co.uk/david-crane/ |title=INTERVIEW – DAVID CRANE (ATARI/ACTIVISION/SKYWORKS) |work=[[Arcade Attack]] |date=May 9, 2016 |accessdate=May 10, 2016 |author=Adrian |deadurl=no |archiveurl=https://web.archive.org/web/20160509160135/http://www.arcadeattack.co.uk/david-crane/ |archivedate=May 9, 2016 |df=mdy-all }}</ref> Companies lured away each other's programmers or used [[reverse engineering]] to learn how to make games for proprietary systems. Atari even hired several programmers from Mattel's Intellivision development studio, prompting a lawsuit by Mattel against Atari that included charges of [[industrial espionage]]. Despite the lessons learned by Atari in the loss of its programmers to Activision, Mattel continued to try to avoid crediting game designers. Rather than reveal the names of [[Blue Sky Rangers|Intellivision game designers]], in a 1981 ''TV Guide'' interview, Mattel instead required that they change their names to protect their collective identities. In the second half of 1982 the number of cartridges grew from 100 in June to more than 400 in December. Experts predicted a glut in 1983, with 10% of games producing 75% of sales.<ref name="mj19821226">{{Cite news |url=https://news.google.com/newspapers?id=nwsdAAAAIBAJ&sjid=QX8EAAAAIBAJ&pg=3635%2C1989311 |title=Stream of video games is endless |work=Milwaukee Journal |date=December 26, 1982 |accessdate=January 10, 2015 |pages=Business 1}}</ref> ''[[BYTE]]'' stated in December that "in 1982 few games broke new ground in either design or format ... If the public really likes an idea, it is milked for all it's worth, and numerous clones of a different color soon crowd the shelves. That is, until the public stops buying or something better comes along. Companies who believe that microcomputer games are the [[hula hoop]] of the 1980s only want to play Quick Profit."<ref name="clark198212">{{Cite news |url=https://archive.org/stream/byte-magazine-1982-12/1982_12_BYTE_07-12_Game_Plan_1982#page/n7/mode/2up |title=The Play's the Thing |work=BYTE |date=December 1982 |accessdate=October 19, 2013 |author=Clark, Pamela |pages=6}}</ref> [[Bill Kunkel (gaming)|Bill Kunkel]] said in January 1983 that companies had "licensed everything that moves, walks, crawls, or tunnels beneath the earth. You have to wonder how tenuous the connection will be between the game and the movie ''[[Marathon Man (film)|Marathon Man]]''. What are you going to do, present a video game root canal?"<ref name=harmetz19830115>{{Cite news|last=Harmetz|first=Aljean|title=New Faces, More Profits For Video Games |url=https://news.google.com/newspapers?id=jnhcAAAAIBAJ&sjid=a1cNAAAAIBAJ&pg=4201,2482231|page=18|accessdate=February 28, 2012|newspaper=Times-Union|date=January 15, 1983}}</ref> By September 1983 the ''Phoenix'' stated that 2600 cartridges "is no longer a growth industry".{{R|mitchell19830906}} Activision, Atari, and Mattel all had experienced programmers, but many of the new companies rushing to join the market did not have the expertise or talent to create quality games. Titles such as Ralston Purina's dog food-themed ''[[Chase the Chuckwagon]]'', the ''[[Kaboom! (video game)|Kaboom!]]''-like ''[[Lost Luggage (video game)|Lost Luggage]]'', rock band tie-in ''[[Journey Escape]]'', and plate-spinning game'' [[Dishaster]]'', were examples of games made in the hopes of taking advantage of the video-game boom. ==Result== ===Immediate effects=== The release of so many new games in [[1982 in video gaming|1982]] flooded the market. Most stores had insufficient space to carry new games and consoles. As stores tried to return the surplus games to the new publishers, the publishers had neither new products nor cash to issue refunds to the retailers. Many publishers, including [[Games by Apollo]]<ref>{{Citation |last=Seitz |first=Lee K. |title=CVG Nexus: Timeline - 1980s |url=http://home.hiwaay.net/~lkseitz/cvg/nexus/features/timeline/1980s.shtml |accessdate=November 16, 2007 |format=– <sup>[https://scholar.google.co.uk/scholar?hl=en&lr=&q=author%3ASeitz+intitle%3ACVG+Nexus%3A+Timeline+-+1980%27s&as_publication=&as_ylo=&as_yhi=&btnG=Search Scholar search]</sup> |archiveurl=https://web.archive.org/web/20071013165228/http://home.hiwaay.net/~lkseitz/cvg/nexus/features/timeline/1980s.shtml |archivedate=October 13, 2007 |deadurl=yes |df=}}</ref> and [[US Games]],<ref name=prince198309>{{Cite magazine |last=Prince |first=Suzan |date=September 1983 |title=Faded Glory: The Decline, Fall and Possible Salvation of Home Video |url=https://archive.org/stream/Video_Games_Volume_1_Number_12_1983-09_Pumpkin_Press_US#page/n17/mode/2up |magazine=Video Games |publisher=Pumpkin Press |access-date=2016-02-24 }}</ref> quickly folded. Unable to return the unsold games to defunct publishers, stores marked down the titles and placed them in discount bins and sale tables. Recently released games which initially sold for US $35 (equivalent to $92 in 2018) were in bins for $5 ($13 in 2018).<ref name=prince198309/><ref name="daglow198808">{{Cite news |title=The Changing Role of Computer Game Designers |work=Computer Gaming World |date=August 1988 |last=Daglow |first=Don L. |pages=18}}</ref> Crane said that "those awful games flooded the market at huge discounts, and ruined the video game business".{{R|aa20160509}} By June [[1983 in video gaming|1983]], the market for the more expensive games had shrunk dramatically and was replaced by a new market of rushed-to-market, low-budget games. A massive industry shakeout resulted. [[Magnavox]] abandoned the video game business entirely. [[Imagic]] withdrew its [[Initial public offering|IPO]] the day before its stock was to go public; the company later collapsed. [[File:Atari E.T. Dig- Alamogordo, New Mexico (14036097792).jpg|thumb|right|Partially-surviving cases and cartridges retrieved during the 2014 excavation of the Alamogordo, New Mexico landfill Atari had used in 1983. ''E.T.'', ''[[Centipede (video game)|Centipede]]'', and other Atari materials can be seen.]] One of the more predominant effects of the 1983 crash was on Atari. In 1982, it had published large volumes of Atari 2600 games that they had expected to sell well, including a port of ''[[Pac-Man]]'' and [[E.T. the Extra-Terrestrial (video game)|game adaption]] of the film ''[[E.T. the Extra-Terrestrial]]''. However, due to the quality of these games and other market factors, much of Atari's production did not get sold. In September 1983, Atari discreetly buried much of this excess stock, as well as unsold stock of earlier games, in a landfill near [[Alamogordo, New Mexico]], though Atari did not comment about their activity at the time. Misinformation related to sales of ''Pac-Man'' and ''E.T.'' led to an [[urban legend]] of the [[Atari video game burial]] that millions of unsold cartridges were buried there. Gaming historians received permission to dig up the landfill as part of a documentary in 2014, during which former Atari executives clarified that only about 700,000 cartridges had been buried in 1982, backed by estimates made during the excavation, and disproving the scale of the urban legend. Despite this, Atari's burial remains an iconic representation of the 1983 video game crash.<ref name="InfoWorld">{{Cite journal |first1=John C |last1=Dvorak |date=August 12, 1985 |title=Is the PCJr Doomed To Be Landfill? |journal=[[InfoWorld]] |volume=7 |issue=32 |page=64 |url=https://books.google.com/books?id=Ai8EAAAAMBAJ&pg=RA1-PA64&dq=atari+landfill#v=onepage&q=atari%20landfill&f=false |accessdate=September 10, 2011}}</ref><ref name="PCAdvisor">{{Cite web|url=http://www.pcadvisor.co.uk/news/tablets/3298074/hp-touchpads-to-be-dumped-in-landfill/ |title=HP TouchPads to be dumped in landfill? |first=Simon |last=Jary |publisher=[[PC Advisor]] |date=August 19, 2011 |accessdate=September 10, 2011 |deadurl=no |archiveurl=https://web.archive.org/web/20111108045640/http://www.pcadvisor.co.uk/news/tablets/3298074/hp-touchpads-to-be-dumped-in-landfill/ |archivedate=November 8, 2011 |df= }}</ref><ref name="WSJ">{{Cite news |url=https://www.wsj.com/articles/SB10001424053111904006104576502744235853146?mod=googlenews_wsj |title=Book Review: Super Mario |newspaper=[[Wall Street Journal]] |first=James |last=Kennedy |date=August 20, 2011 |accessdate=September 10, 2011 |deadurl=no |archiveurl=https://web.archive.org/web/20170906225910/https://www.wsj.com/articles/SB10001424053111904006104576502744235853146?mod=googlenews_wsj |archivedate=September 6, 2017 |df=mdy-all }}</ref> As a result, while some stores sold new games and machines, most retailers stopped selling video game consoles or reduced their stock significantly, reserving floor or shelf space for other products. This was the most formidable barrier that confronted [[Nintendo]], as it tried to market its [[Nintendo Entertainment System|Famicom]] system in the United States. Retailer opposition to video games was directly responsible for causing Nintendo to brand its product an ''"Entertainment System"'' rather than a ''"console"'', using terms such as ''"control deck"'' and ''"Game Pak"'', as well as producing a toy robot called ''[[R.O.B.]]'' to convince toy retailers to allow it in their stores. Furthermore, the design for the Nintendo Entertainment System (NES) used a front-loading cartridge slot to mimic how [[video cassette recorder]]s, popular at that time, were loaded, further pulling the NES away from previous console designs.<ref>{{Cite episode |title=NES |url=http://g4tv.com/gamemakers/episodes/4844/NES.html |series=Icons |serieslink=Icons (TV series) |credits= |network=[[G4 (U.S. TV channel)|G4]] |airdate=December 1, 2005 |season=4 |number=5010 |deadurl=no |archiveurl=https://web.archive.org/web/20121016233741/http://www.g4tv.com/gamemakers/episodes/4844/NES.html |archivedate=October 16, 2012 |df=mdy-all }}</ref><ref>{{Cite web |url=http://archive.gamespy.com/articles/july03/25smartest/index22.shtml |title=25 Smartest Moments in Gaming |publisher=[[GameSpy]] |page=22 |date=July 21–25, 2003 |deadurl=no |archiveurl=https://web.archive.org/web/20120902124439/http://archive.gamespy.com/articles/july03/25smartest/index22.shtml |archivedate=September 2, 2012 |df=mdy-all }}</ref><ref>{{Cite web | url = https://www.theverge.com/2015/10/18/9554885/nintendo-entertainment-system-famicom-history-masayuki-uemura | title = 7 things I learned from the designer of the NES | first = Sean | last = O'Kane | date = October 18, 2015 | accessdate = September 21, 2018 | work = [[The Verge]] }}</ref> The crash also affected [[Amusement arcade|video game arcade]]s. While the number of arcades in the United States had doubled to 10,000 from 1980 to 1982, the crash lead to a closure of around 1,500 arcades, and revenues of those that remained open had fallen by 40%.<ref name="nytimes 1983">{{Cite web | url = https://www.nytimes.com/1983/10/17/business/video-games-industry-comes-down-to-earth.html | title = Video Games Industry Comes Down To Earth |first= N.R. | last = Kleinfield | date = October 17, 1983 | accessdate = September 21, 2018 | work = [[The New York Times]] }}</ref> The full effects of the industry crash would not be felt until 1985.<ref>{{Cite journal |last=Katz |first=Arnie |title=1984: The Year That Shook Electronic Gaming |journal=[[Electronic Games]] |date=January 1985 |volume=3 |issue=35 |pages=30–31 [30] |url=https://archive.org/stream/electronic-games-magazine-1985-01/Electronic_Games_Issue_35_Vol_03_11_1985_Jan#page/n29/mode/2up |accessdate=February 2, 2012}}</ref> Despite Atari's claim of 1 million in sales of its 2600 game system that year,<ref>{{Cite web|url=http://www.atarimagazines.com/compute/issue71/electronics_show.php|title=A Turning Point for Atari? Report from the Winter Consumer Electronics Show|first=Tom R.|last=Halfhill|publisher=|deadurl=no|archiveurl=https://web.archive.org/web/20160409221229/http://www.atarimagazines.com/compute/issue71/electronics_show.php|archivedate=April 9, 2016|df=mdy-all}}</ref> recovery was slow. The sales of home video games had dropped from $3.2 billion in 1982<ref name="nintendoland">{{Cite web |author=Liedholm, Marcus and Mattias |title=The Famicom rules the world! – (1983–89) |work=Nintendo Land |url=http://nintendoland.com/history/hist3.htm |accessdate=February 14, 2006 |archiveurl=https://web.archive.org/web/20100101161115/http://nintendoland.com/history/hist3.htm |archivedate=January 1, 2010}}</ref> to $100 million in 1985.<ref>{{Cite news|url=https://news.google.com/newspapers?id=qKIbAAAAIBAJ&sjid=R04EAAAAIBAJ&pg=5459,6856521|title=NEC out to dazzle Nintendo fans|last=Dvorchak|first=Robert|date=July 30, 1989|work=The Times-News|access-date=May 11, 2017|page=1D}}</ref> Analysts doubted the long-term viability of the video game industry,<ref>{{Cite web|url=https://news.google.com/newspapers?nid=1320&dat=19821212&id=L2tWAAAAIBAJ&sjid=q-kDAAAAIBAJ&pg=1609,4274079&hl=en|title=Gainesville Sun - Google News Archive Search|publisher=}}</ref> but following the release of the [[Nintendo Entertainment System]], the industry began recovering, with annual sales exceeding $2.3 billion by 1988, with 70% of the market dominated by Nintendo.<ref>{{Citation |title=Toy Trends |work=Orange Coast |date=December 1988 |volume=14 |issue=12 |issn=0279-0483 |publisher=[[Emmis Communications]] |page=88 |url=https://books.google.com/books?id=82AEAAAAMBAJ&pg=PA88 |accessdate=April 26, 2011}}</ref> In 1986, [[Nintendo]] president [[Hiroshi Yamauchi]] noted that "Atari collapsed because they gave too much freedom to third-party developers and the market was swamped with rubbish games". In response, Nintendo limited the number of titles that third-party developers could release for their system each year, and promoted its "[[Nintendo#Seal of Quality|Seal of Quality]]", which it allowed to be used on games and peripherals by publishers that met Nintendo's quality standards.<ref name=takiff19860620>{{Cite news |last=Takiff |first=Jonathan |title=Video Games Gain in Japan, Are Due For Assault on U.S. |url=https://news.google.com/newspapers?id=QBhcAAAAIBAJ&sjid=MlUNAAAAIBAJ&pg=2846,1271636 |accessdate=April 10, 2012 |newspaper=[[The Vindicator]] |date=June 20, 1986 |page=2}}</ref> The end of the crash allowed Commodore to raise the price of the C64 for the first time upon the June 1986 introduction of the Commodore 64c—a Commodore 64 redesigned for lower cost of manufacture—which ''Compute!'' cited as the end of the home-computer price war,<ref name="compute198607">{{Cite news |url=https://archive.org/stream/1986-07-compute-magazine/Compute_Issue_074_1986_Jul#page/n7/mode/2up |title=Editor's Notes |work=Compute! |date=July 1986 |accessdate=November 8, 2013 |author1=Lock, Robert |author2=Halfhill, Tom R. |pages=6}}</ref><ref name="leemon198702">{{Cite news |url=https://archive.org/stream/1987-02-compute-magazine/Compute_Issue_081_1987_Feb#page/n25/mode/2up |title=Microfocus |work=Compute! |date=February 1987 |accessdate=November 9, 2013 |author=Leemon, Sheldon |pages=24}}</ref> one of the causes of the crash.<ref>{{Cite web |url=http://www.ign.com/articles/2011/09/21/ten-facts-about-the-great-video-game-crash-of-83 |title=Ten Facts about the Great Video Game Crash of '83 |quote=Around the time home consoles started falling out of favor, home computers like the Commodore Vic-20, the Commodore 64, and the Apple ][ became affordable for the average family. Needless to say, the computer manufacturers of the age seized on the opportunity to ask parents, "Hey, why are you spending money on a game console when a computer can let you play games and prepare you for a job?" |deadurl=no |archiveurl=https://web.archive.org/web/20150510201705/http://www.ign.com/articles/2011/09/21/ten-facts-about-the-great-video-game-crash-of-83 |archivedate=May 10, 2015 |df=mdy-all }}</ref> ===Long-term effects=== {{See also|Third generation of video game hardware}} The crash in 1983 had a significant impact on all sectors of the global video game market worldwide which took several years for it to recover. The estimated {{USD|42 billion}} market in 1982, including consoles, arcade, and personal computer games, dropped to {{USD|14 billion}} by 1985, with a significant shift away from arcades and consoles to personal computer software in the years that followed.<ref name="vgmarket"/> The North American video game crash had two long-lasting results. The first result was that dominance in the home console market shifted from the United States to Japan. By [[1986 in video gaming|1986]], three years after its introduction, 6.5 million Japanese homes—19% of the population—owned a [[Nintendo Entertainment System|Family Computer]], and Nintendo began exporting it to the U.S.;{{R|takiff19860620}} by [[1987 in video gaming|1987]] the Nintendo Entertainment System was very popular in North America.<ref>{{Cite journal |author=Consalvo, Mia |year=2006 |title=Console video games and global corporations: Creating a hybrid culture |journal=New Media & Society |volume=8 |issue=1 |pages=117–137 |doi=10.1177/1461444806059921 |url=http://nms.sagepub.com/cgi/content/abstract/8/1/117 |archiveurl=https://web.archive.org/web/20080228191914/http://intl-nms.sagepub.com/cgi/reprint/8/1/117.pdf |archivedate=February 28, 2008 |format=PDF}}</ref> When the U.S. video game market recovered in the late 1980s the NES was by far the dominant console, leaving only a fraction of the market to a resurgent Atari. By 1989, home video game sales in the United States had reached $5 billion, surpassing the 1982 peak of $3 billion during the previous generation. A large majority of the market was controlled by Nintendo; it sold more than 35 million units in the United States, exceeding the sales of other consoles and personal computers by a considerable margin.<ref>{{Citation |title=Playing with Power in Movies, television, and Video Games: From Muppet Babies to Teenage Mutant Ninja Turtles |first=Marsha |last=Kinder |publisher=[[University of California Press]] |year=1993 |isbn=0-520-07776-8 |page=90 |url=https://books.google.com/books?id=raDNu1lThHQC&pg=PA90 |accessdate=April 26, 2011}}</ref> Other Japanese companies also rivaled Nintendo's success in the United States, with Sega's [[Mega Drive]]/Genesis in 1989 and NEC's [[PC Engine|PC Engine/TurboGrafx 16]] released the same year. {{Image frame|width=225|align=right|content=[[File:NES-Console-Set.jpg|200px]]<br/>[[File:Sega-Genesis-Mod1-Set.jpg|200px]]|caption=Following the crash, Nintendo became the market leader in America with the [[Nintendo Entertainment System]] (top), with Japanese companies dominating the market for years to come. The [[Sega Genesis]] (bottom) released in 1988 was the first real challenger to Nintendo's market dominance in North America.}} A second, highly visible result of the crash was the advancement of measures to control [[third-party developer|third-party development]] of software. Using secrecy to combat [[industrial espionage]] had failed to stop rival companies from reverse engineering the Mattel and Atari systems and hiring away their trained game programmers. While Mattel and Coleco implemented lockout measures to control third-party development (the [[ColecoVision]] BIOS checked for a copyright string on power-up), the Atari 2600 was completely unprotected and once information on its hardware became available, little prevented anyone from making games for the system. Nintendo thus instituted a strict licensing policy for the NES that included equipping the cartridge and console with lockout chips, which were region-specific, and had to match in order for a game to work. In addition to preventing the use of unlicensed games, it also was designed to combat [[software piracy]], rarely a problem in the United States or Western Europe, but rampant in East Asia.{{Citation needed|date=July 2017}} [[Accolade]] achieved a technical victory in one court case against [[Sega]], challenging this control, even though it ultimately yielded and signed the Sega licensing agreement. Several publishers, notably [[Tengen]] (Atari), [[Color Dreams]], and [[Camerica]], challenged Nintendo's control system during the 8-bit era by producing unlicensed NES games. The concepts of such a control system remain in use on every major video game console produced today, even with fewer "cartridge-based" consoles on the market than in the 8/16-bit era. Replacing the security chips in most modern consoles are specially encoded [[optical disc]]s that [[Copy protection#Video game console systems|cannot be copied]] by most users and can only be read by a particular console under normal circumstances. Nintendo limited most third-party publishers to only five games per year on its systems (some companies tried to get around this by creating additional company labels like [[Konami]]'s [[Ultra Games]] label); Nintendo would ultimately drop this rule by 1993 with the release of the [[Super Nintendo Entertainment System]].<ref>{{Cite web | url = https://kotaku.com/5930361/how-konami-cheated-to-get-around-a-silly-nintendo-rule | title= Konami's Cheat to Get Around a Silly Nintendo Rule | first = Luke | last= Plunkett | date = July 21, 2012 | accessdate = September 21, 2018 | work = [[Kotaku]] }}</ref> It also required all cartridges to be manufactured by Nintendo, and to be paid for in full before they were manufactured. Cartridges could not be returned to Nintendo, so publishers assumed all the financial risk of selling all units ordered. As a result, some publishers lost more money due to distress sales of remaining inventory at the end of the NES era than they ever earned in profits from sales of the games. Nintendo portrayed these measures as intended to protect the public against poor-quality games, and placed a [[Nintendo Seal of Quality|golden seal of approval]] on all licensed games released for the system. Further, Nintendo implemented its proprietary [[10NES]], a [[lockout chip]] which was designed to prevent cartridges made without the chip from being played on the NES. The 10NES lockout was not perfect, as later in the NES's lifecycle methods were found to bypass it, but it did sufficiently allow Nintendo to strengthen its publishing control to avoid the mistakes Atari had made.<ref>{{Cite web | url = https://arstechnica.com/gaming/2013/07/time-to-feel-old-inside-the-nes-on-its-30th-birthday/ | title = The NES turns 30: How it began, worked, and saved an industry | first= Andrew | last= Cunningham | date = July 15, 2013 | accessdate = September 21, 2018 | work = [[Ars Technica]] }}</ref> These strict licensing measures backfired somewhat after Nintendo was accused of [[Competition law|trust]] behavior.<ref>{{Cite web |author1=U.S. Court of Appeals |author2=Federal Circuit |year=1992 |title=Atari Games Corp. v. Nintendo of America Inc. |work=Digital Law Online |url=http://digital-law-online.info/cases/24PQ2D1015.htm |accessdate=March 30, 2005 |deadurl=no |archiveurl=https://www.webcitation.org/618x69H52?url=http://digital-law-online.info/cases/24PQ2D1015.htm |archivedate=August 23, 2011 |df=mdy-all }}</ref> In the long run, this pushed many western third-party publishers such as [[Electronic Arts]] away from Nintendo consoles, and would actively support competing consoles such as the [[Sega Genesis]] or [[PlayStation (console)|Sony PlayStation]]. Most of the Nintendo platform-control measures were adopted by later console manufacturers such as Sega, Sony, Microsoft, and Intellivision Entertainment although not as stringently. {{-}} ==References== {{Reflist|30em}} ==Further reading== * DeMaria, Rusel & Wilson, Johnny L. (2003). ''High Score!: The Illustrated History of Electronic Games'' (2nd ed.). New York: McGraw-Hill/Osborne. {{ISBN|0-07-222428-2}}. * Gallagher, Scott & Park, Seung Ho (2002). "Innovation and Competition in Standard-Based Industries: A Historical Analysis of the U.S. Home Video Game Market". ''IEEE Transactions on Engineering Management'', vol. 49, no. 1, February 2002, pp. 67–82. 10.1109/17.985749 ==External Links== * [http://thedoteaters.com/?bitstory=the-great-video-game-crash The Dot Eaters.com: "Chronicle of the Great Videogame Crash"] * [https://web.archive.org/web/20060618195311/http://www.twingalaxies.com/index.aspx?c=17 Twin Galaxies Official Video Game & Pinball Book of World Records: "The Golden Age of Video Game Arcades"] — ''story within the 1998 book''. * [http://www.intellivisionlives.com/history.php Intellivisionlives.com: Official Intellivision History] — ''by the original programmers''. * [http://www.erasmatazz.com/library/the-journal-of-computer/jcgd-volume-5/the-atari-years.html The History of Computer Games: The Atari Years] — ''by Chris Crawford, a game designer at Atari during the crash''. * [http://pctimeline.info/c64/ Pctimeline.info: Chronology of the Commodore 64 Computer] — ''Events & Game release dates (1982–1990)''. {{History of video games}} [[Category:Historical events]]
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