Transcript: The Fall of Atari

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Episode “The Fall of Atari”

Jeff: So Atari was one of the fastest growing companies ever in America, no one had ever seen anything like it. And it was just this new exciting business. And people for the first time realized that video games were going to be a big thing. But the implosion was so massive and so quick that it almost brought down video games entirely.
Josh: Atari was sort of like the dark side of hippy culture, a bunch of dudes working out of a warehouse, a bunch of stoners, some really talented programmers. Come 1976, they were ready in production on the VCS, which would later be the Atari 2600
Jeff: So Atari has this idea for a console with interchangeable cartridges. And they want to get it out on the market, but Fairchild semiconductors, this other million dollar company which was into semiconductors obviously, put one out. And Atari sees it and they say we got to get out there now before this hits it big, this is our idea.
Dan: So what they did was they went to Warner and they said, hey come in with us buy out our company and put some money in and we can put out this thing and we will make a lot of money together. So Warner put in like 30 million dollars to buy this company, then they put in like another hundred million to get this thing out on the market in time for the big holiday season.
TJ: So ultimately Atari selling themselves to Warner worked, because we have never heard of Channel F. But that sale and that success came at a price.
Josh: Realistically the hippy culture that permeated Atari wasn’t conducive to making profits. And they needed to go through some changes.
Dan: So Nolan Bushnell, he is the founder, he also started Chucky Cheese. He gets forced out. They beam in Ray Kassar from corporate headquarters. And he is a button down suit and tie guy and he is going to turn everything around and make this a traditional by the numbers company. No more coming in at noon, no more smoking the reefer in the office.
Jeff: It was a culture clash and in a lot of ways it destroyed what made Atari so great I the first place. So from these starting limitations, like having to water socks to the office, other problems grew out of that. The guys who were making the games, they were getting paid maybe thirty grand a year. And they would say, hey I made this game; you just made ten million dollars off of it. Can I get a little bonus, can I get something extra? No, nothing.
Libe: Kassar wouldn’t let the people who made the games take any credit for their work. Like their names weren’t mentioned on the game anywhere, they were just basically programming monkeys. The credit went to Atari.
Jeff: Game design at this point is maybe not appreciated as the art it is today. Even today I think people still look at it as just programming. It is not, there are a lot of choices to be made on a creative level. And they didn’t really understand that at the time. So the designers weren’t particularly well paid, and they weren’t well respected.
Libe: Atari’s top game makers went to the brass, and tried to get some more money, some royalties from the games they made. And it never worked out, so a bunch of the top designers left Atari and went to make their own company.
Dan: And they actually do it, they leave and they make Activision. And Activision starts making games for the Atari 2600.
TJ: Which nobody saw coming. Atari certainly didn’t see it coming. Now this has never happened before, mind you this is a big thing.
Shandi: Atari never thought that, that could have happened, that there designers would leave. That if they left they would be like ok well you still have a job. I don’t think they thought they were smart enough to be like well, I don’t think it’s illegal for us to create our own games.
Dan: It’s not just that some guys were leaving Atari; it’s that the best guys were leaving Atari. And they were making great games, like River Raid, like Pitfall. They were making better Atari games than Atari was making.
Josh: And there actually were royalties on the sales of there games, so people were more invested in the work they were producing. It almost seems like a no brainer.
Jeff: David Crane, who created Pitfall. Pitfall always said, David Crane’s pitfall. Like Francis Ford Coppola's the Godfather, you know. He put his name on it, it was his work.
Josh: The crazy thing is within two years after Kassar started showing up, Atari became the fastest growing company in the history of the United States.
TJ: And in 1982 Activision replaced Atari as the fastest growing company in the history of the United States.
Dan: Well that just opened the flood gates, and then everybody and there cousin started a game company and started making cartridges for the Atari 2600.
Jeff: One Activision is out there and people start to realize hey, I can get rich making games for the Atari, then they still needed to learn the same lesson Ray Kassar did, video games are art form. You can’t just make one with no thought. You need the right people to do it. And there is just a flood of terrible, terrible games for the Atari. To the point were it becomes impossible to separate the weak from the strong. You don’t know which ones are the good ones, and which ones are the bad ones. People start to think that Atari is garbage, because that’s what most of the things that were on it, were garbage.
Dan: Now with all these really bad games flooding the market Atari says we need to do something to cut through the clutter. We are going to pull out the big guns and do some really big a list titles. The first one is Pac Man.
Josh: People were psyched; retailers were clearing shelves for this game. They produced 12 million copies when only 10 million systems were in existence, thinking that Pac man was actually going to sell more systems. It was going to be that big.
Jeff: Unfortunately they thought it was just the name Pac Man was enough. That was enough; the product itself was not that good. It flickered, it had slowdown, and it didn’t even look like the arcade version. The sound effects wee awful. Everything they could have failed on this home Pac Man, they did.
Dan: So that was the first ace up the sleeve that went boom, nowhere. The second ace, turned out to be the second nail in there coffin. That was E.T. the video game.
Josh: When they decided to make the E.T. game, around June July of 82, when they wanted the game to come out, Christmas of 82.
Dan: Now this is a classic example of the artist vs. the corporate guys. The corporate guys say hey, we just signed a deal with Spielberg; we got to get an E.T game out there. And the artist say ok, we will make a game, it will take us six months, and the studio guys go, six months f.a. you got six weeks, we got to get this thing on the trucks and on the shelves so we don’t miss a day of the holiday shopping season.
Jeff: It would be insane if a movie producer bought the movie rights to a book, and was like we have to make a movie out of this, we have eight hours. You know, and that’s basically what they did with E.T.
Dan: So six weeks go by, and they end up with something. I don’t know if you could really call it a game, but it was on a cartridge and you had something that looked a little like E.T. and you walked around and fell in some holes. But really it was one of the worst games of all time.
Jeff: The roots of all these problems are just the lack of respect for the design of the games. And they look at them and they are like, moving blocks are moving blacks, what’s the difference. They thought everyone has to have this game, but when the games garbage, no one needs to have it. They are basically selling a box with E.T on it.
Josh: Atari was left with over 2 million unsold cartridges that were returned from retailers. They just dumped the in a land fill somewhere in New Mexico.
Dan: So just like that the golden age of Atari was over they had lost the hearts and minds of the people.
Josh: By the end of 1983, Atari had just completely tanked. Eventually they posted a $350 million dollar loss. By the end of that year, grew to over $530 million.
Dan: So Warner says we got to get out of this business, this is killing us. So they break up the company, they sell the different divisions off. And the Atari name bounces around for years, being bought and sold. Eventually it’s bought by a French company. That is where it is today. And people don’t realize that the Atari name they see today has nothing to do with the original Atari Company. Somebody just bought the intellectual property rights to the name.
Jeff: I guess the lesson of the whole story is just that, just to look at video game design as an art form. It’s not something you just put out in a factory. You need smart creative people to do it. It is its own medium.
Shandi: That is the main rule of thumb when you have a company, do not crap on your employees. Because you make them unhappy they are going to leave. And they are going to come up with other ways to make money doing what they do.
TJ: The lesson to be learned is, treat your employees well, or you risk dying.