The rise and fall of Atari

July 29, 2006

The tale of game manufacturer Atari’s rise to market dominance in the late 70s and early 80s is as much about innovative electronic art as it is savvy business operations. It is unsurprising, then, that when the creativity dried up at Atari, so did the profits.

At its peak, Atari was the pre-eminent video game manufacturer in the world. But by the mid 80s, its fortunes had so radically changed that it was forced to literally dump hundreds of thousands of game cartridges and consoles in the New Mexico desert.

In the early 1980s Atari owned 80% of the video game market, they accounted for 70% of Warner’s operating profits, and in the fourth quarter of 1982 the Wall Street “whisper number” concerning Atari’s expected earnings predicted a 50% increase over the previous year.

If one game cartridge could be selected as the symbol of the sudden demise of Atari’s golden goose, however, it would have to be the ill-fated E.T.

Atari rushed E.T. through development in a matter of months to get it onto the market in time for Christmas, and the result was a virtually unplayable game with a dull plot and crummy graphics in which frustrated players spent most of their time leading the E.T. character around in circles to prevent him from falling into pits. Atari produced five million E.T. cartridges, and according to Atari’s then-president and CEO, “nearly all of them came back.”

Some other video game manufacturers attempted to rid themselves of excess inventory by selling it at sharply reduced prices, but Atari, stuck with millions of games and consoles that were largely unsellable at any price, sent fourteen truckloads of merchandise from their plant in El Paso, Texas, to be dumped in a city landfill in Alamogordo, New Mexico in late September 1983. In order to keep the site from being looted, steamrollers crushed and flattened the games, and a concrete slab was poured over the remains.

Read an exhaustive history of Atari and other early video game companies at “The Dot Eaters”.

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