Why Did the World's First Game Console 'Atari' Fail? [Im Juhyung's Tech Talk]

The World's First Home Console Game System 'Atari 2600'
The First Game Console Supporting Various Games by Cartridge Replacement
Led the Growth of the US Home Game Market in the 1980s
But Failed in Game Quality Control, Leading to the 'Atari Shock'

Sample products of the Japanese Nintendo gaming console 'Nintendo Switch' displayed at a major domestic supermarket on the 17th. / Photo by Yonhap News

[Asia Economy Reporter Lim Juhyung] Recently, home gaming consoles have been gaining popularity in South Korea as well. Especially with the spread of the novel coronavirus disease (COVID-19) ushering in a contactless era, Nintendo's gaming console 'Switch' has become a hot topic. Besides this, names like Sony's 'PlayStation' and Microsoft's 'Xbox' are familiar even to those who are not particularly interested in gaming.

These home gaming consoles are used by placing the console on the floor, connecting cables to a TV or computer monitor, and holding a unique gamepad to play. Since the main unit of the console is called a 'console,' these devices are also referred to as console gaming systems.

So, where did the origins of console gaming, which now occupies a corner of our living rooms, begin?

Currently, most companies that manufacture console gaming systems, except Microsoft, are Japanese. However, the first commercial console gaming system was released in the United States. It was the 'Atari 2600,' launched by Atari in 1977.

At that time, games could only be enjoyed through large arcade machines installed in game centers. Moreover, these machines could only run a limited number of games.

However, Atari researchers devoted themselves to developing a gaming system capable of running multiple types of games within a small main unit, and as a result, they completed the world's first microprocessor-based console gaming system, the 'Atari 2600.'

The first console game system 'Atari 2600' and the control stick. / Photo by Wikipedia capture

The Atari 2600 consists of the main unit, a game controller pad, and a memory card called a 'cartridge' that contains the game software. When the cartridge is inserted into the console, the system reads the information stored in the cartridge and runs the game. In other words, by simply swapping cartridges, users could enjoy a variety of games.

The Atari 2600 achieved great success, selling over 30 million units after its release. Especially, games like 'Space Invaders' and 'Pac-Man,' released in 1980, became immensely popular, causing sales to quadruple within a year.

The relationship between game console developers and game production companies, which is common today, was also established by Atari. In the early 1980s, Atari needed entertaining games to boost console sales. At that time, some game developers disassembled Atari consoles to analyze them and independently developed and sold games.

Initially, Atari filed copyright infringement lawsuits against these developers but soon realized that these game developers were actually increasing Atari console sales.

Eventually, Atari and the game developers reached a compromise under the condition that 'game developers pay Atari a certain royalty to release games.' This approach is now called 'third-party' in the gaming industry and was the first business model established by Atari.

However, the third-party policy indirectly contributed to Atari's downfall. At that time, Atari only collected royalties from third-party companies and did not implement any quality control to manage the quality of the games.

After the third-party policy was established, some game developers produced a large number of low-quality games. The photo shows a game created by the game development division of the American cereal company 'Quaker Oatmeal' (above) and the video game 'E.T.' released directly by Atari in 1982 / Photo by Internet Community Capture

As a result, game companies developed large quantities of low-quality games and sold them at high prices. Some companies unrelated to gaming even entered Atari game development. For example, in 1981, the American cereal manufacturer Quaker Oatmeal created a game development division and released 16 games, and adult pornographic games also flooded the market.

The game 'E.T.,' released in 1982, received particularly harsh criticism as the 'worst game in history.' E.T. was based on the movie of the same name produced by American film director Steven Spielberg. At the time, Warner Communications, Atari's parent company, expected the game to sell about 4 million copies and ordered 4 million cartridges.

The 'E.T.' game cartridge excavated in the desert near Alamogordo, New Mexico, USA, in 2014. / Photo by YouTube Capture

However, out of the initial 1.5 million units sold, 1 million were returned, and Atari was left with 3.5 million unsold E.T. cartridges. With no way to handle the inventory, Atari buried all 3.5 million cartridges whole in the desert near Alamogordo, New Mexico, USA. Some of these cartridges were excavated by volunteers during a dig in 2014.

Disappointed by Atari's low-quality games, consumers began to abandon home gaming consoles one by one after E.T. In fact, the U.S. video game market, which was worth $3 billion (about 3.53 trillion KRW) in 1982, shrank to about $100 million (about 117.7 billion KRW) by 1985. This means that 97% of the entire market disappeared.

As a result of this shock, many game developers who supplied games to Atari went bankrupt, and Atari suffered losses exceeding $1 billion before eventually being split and sold to other companies. This event is known as the 'Atari Shock.'

However, the home console gaming system operation method and business model established by Atari were actively inherited by later entrants such as Japan's Nintendo and Sega, becoming industry standards. After the Atari Shock, the console gaming market gradually recovered and grew into a massive industry exceeding $45 billion (about 53 trillion KRW) as of 2019.