Atari weathered the video game crash of 1977, brought on by the rampant theft and cloning of the wildly successful Pong. I, being a wee Israeli boy far from America’s I.P. laws, was definitely part of the problem playing Berzerk on my Atari 2600 knock-off.
It all started in space
in 1971, Ted & Nolan were ready to make the leap into the future; from designing pinball and midway games to something else. Their little company, Syzygy, was trying to poach a talented engineer named Al from Ampex where Noland had worked previously. Showing up in Al’s office, Noland offered to show him their startup’s new “game on a TV screen”.
In a strange, giant office full of oscilloscopes and mad scientist paraphernalia, Al walked up to a black and white 13″ TV screen suspended at eye level inside a colorful enclosure. Nolan had gotten a pool manufacturer to custom build the futuristic cabinet and the place still smelled of warm fiberglass.
The tiny ship battling flying saucers was a clone of a 1963 MIT collaborative game called Space Wars! But that game ran on elaborate time sharing units. Al couldn’t figure out what could possibly be powering this elegant cabinet. Looking under the hood he saw a mishmash of parts stolen from Ampex and the TV’s own circuitry jury rigged to produce a viable game. No processor, no software, no frame buffer and barely any memory, but a little dot moved.
Nolan offered Al a job for $1000/month and a 10% stake in Syzygy. Although impressed by the technical trick and the balls it took for Ted & Nolan to leave their well paying Ampex jobs to start Syzygy, Al was hesitant. Finally, with a push from his girlfriend, Al accepted and showed up to work in Sunnyvale California.
Al quickly discovered that Nolan was a bit of a lying asshole. The leap of faith that had so impressed Al and convinced him to leave his job was only a leap for him. Nolan actually had a high paying job with Nutting Associates, a midway game maker and the owner of the building they were in. For extra security Nolan also negotiated a distribution deal for Computer Space! with himself as an independent contractor.
The few electronic bits Al saw dangling from the TV circuit boards were taken from Ampex which probably granted them some rights to the game. Nolan assured Al that Ampex had passed on the offer and all was well. This was Nolan speak for “I didn’t ask.”
Undeterred, Al set to work on Nolan’s first mission. A very specifically described tennis game for corporate giant, General Electric. After three months of tinkering with the finest black & white TV he could buy, creating segmented paddles and figuring out how to make a satisfying pong noise, Al showed his game off to Ted & Nolan. While the game was good he did not meet GE’s specs, building a machine that required too many chips.
That’s when Nolan let Al know that GE wouldn’t mind, since they knew nothing of the project. It had all been more of a creative exercise. Also the game was so specific because Nolan had stolen the design from Magnavox’s table tennis game for the Odyssey system. But Al’s version was better and Pong was born.
The Great Pong Crash of 77
While Computer Space! only sold a few thousand units and was a financial failure, the purloined Pong proliferated. A dingy bar housed the first installation, an ugly wooden cabinet with a laundromat coin receiver welded on. 35,000 units soon followed.
Syzygy already existed as possibly a roofing installer so the company was renamed Atari, a threatening move in Go roughly equivalent to a check in chess. Nolan, insecure about the complete lack of business knowledge amongst the trio applied his engineer brain to becoming a businessman. Taking all credit and referring to himself as the sole founder, Nolan alienated Ted.
In a stunning display of tactical cruelty, Nolan summoned Ted who was in charge of Atari’s manufacturing. In front of Al, Nolan bombarded Ted with basic operational questions. Ted bombed and a month later left Atari with a severance package.
Alcorn was surprised and heartbroken to see that Dabney had no answers. “That was a very sad moment. I really loved Ted,” Alcorn recalled years later. (“I engineered that epiphany on Al’s part,” Bushnell says with satisfaction.)
As much as Nolan was a dick, Al was loved by the engineers and two approached him in 1974 to create a home version of Pong. After failing with all toy and electronic retailers, Nolan impressed Sears and a distribution and licensing deal was reached. Nolan could only manufacture 75,000 units by Christmas but Sears needed twice as many. Using his superpower of lying and then making it so, Nolan signed. Home Pong became Sears’ best selling product that holiday season.
Success brought a lawsuit from Magnavox and dozens and dozens of clones. By 1977 the world was weary of pong and retailers had massive inventories that even deep discounts did not move. The video game market crashed right as Atari was developing its VCS system. Realizing Atari lacked the funds to see development through, Nolan looked for buyers.
Saved by aliens
In 1976 Steven J. Ross, of Warner Communication Inc bought Atari for $29 million on sales of $39 million. Ross liked to take gambles on high margin deals but left the running of his acquisitions completely up to their management. Sensing Atari might need chaperoning he sent securities analyst Manny Gerard to keep an eye on things. Seeing the complete lack of structure Manny summarized the operation as “amateur night in Dixie”. To add some professionalism, Manny brought in textile expert, Ray Kasser.
The initial run of 800,000 VCS systems released 1978 did not sell fully, requiring further investment from Warner. While the company struggled, Nolan, still chairman of Atari, was enjoying his massive piles of money. After a disagreement about keeping the Atari an Apple-like closed system, Manny fired Nolan. To slightly up the cosmic karma, Nolan also passed on buying 1/3 of Apple for $50,000 after two weirdos who had made a Breakout game for him (Jobs and Wozniak) asked for an investment. Nolan could focus on what would become Chuck e. Cheese.
Manny thought the future was in handheld gaming but was proven wrong when Super Breakout failed miserably. Kasser, now CEO, kept plugging away at the VCS selling 400,000 consoles in 79′ and the huge coin-op hit Asteroid. In January of 1980 Atari bought the home rights to a Japanese coin-op game called Space Invaders. Rick Mauer worked for 96 hours straight to convert the arcade game to the home system and people lost their shit.
All Hail Kasser
While Nolan was undoubtedly shady, he was an engineer at heart, full of ideas and loved games. He ran Atari in the same way a lamp runs moths. Kasser was an old textile guy. He sold towels. Towels rarely have technical innovations and so it’s largely up to marketing to carve out market share from an established, mature market. He ran Atari like a mad king. All decisions flowed through him and anyone’s value in the company was directly related to how much they pleased Kasser.
Executives were pitted against each other in bloodless battles of favor, with rules written on the spot by the paranoid and mercurial Kasser. Anyone who built a powerbase was fired. The coin-op division went through 17 presidents in three years. Supremely talented engineers fled, Kasser called them towel-makers and insisted that:
“I’ve dealt with your kind before. You’re a dime a dozen. You’re not unique. Anybody can do a cartridge.”
On the strength of insane margins, Atari grew as it shed talent. In 1980 Atari grosses over $400mil, one-third of Warner’s total annual income and becomes the fastest growing company in US history. Later that year four former Atari employees found Activision and become the first, third-party video game maker. In 1981 another group of game designers leaves Atari to form Imagic. Doubling down, Kasser calls them “high-strung prima donnas”. Employees react by wearing t-shirts with an opera singer and the words “I’m another high-strung prima donna from Atari” on them.
While the workers suffered, Kasser earned millions in salary and lavished his sycophants with massive bonuses, jaunts on the Warner G-3 Gulfstream private jet and chauffeured rides in the company Rolls Royce. The remaining VCS programmers were forced to work on endless licensing movie conversions, including E.T. – the worst game in history.
Shit goes Berzerk
Berzerk was a coin-op conversation precursor to the twin shooter genre. Your little stick-man navigated random mazes, destroying an endless number of increasingly hostile robots. Created by Alan McNeil after seeing the BASIC game Robots (Daleks in the UK) and having a nightmare about fighting black and white terminators. The arcade version was the first game to use synthesized speech, beckoning passerbys with robotic cries of “Coins detected in pocket!” It was a huge success. Thanks to Alan’s refining the game was so good it may have caused the first video game fatality.
The 1982 Atari version kept most of the gameplay intact and later updated the number of robot types from 3 to 10. The game’s hook is an invincible smiling faced boss named Otto who chases the player through walls should they dally. The fear caused you to play far faster and more recklessly than necessary leading to death and self recrimination, which for all healthy humans results in a replay.
Otto is named after Dave Otto, the security chief at McNeil’s former employer, Dave Nutting Associates who gave Syzygy their first order. In what must not have been creepy behaviour in the 70’s, Otto was fond of smiling while disciplining employees and piping “beautiful” music into every office.
The same year I was blissfully blasting endless colorful robots, Kasser and Atari went a little berzerk. While revenue climbs to $2 billion, executives quit or get fired weekly. Then, for no real reason beyond hubris, Kasser sells 5000 shares of Warner stock; chump change compared to his $3million salary. 23 minutes later Warner lowers projected earnings by 50%. Investors panic and the stock dives from $54 to under $30 in less than a week.
In the first quarter of 83 Atari closes its domestic manufacturing plant and loses $45.6 million. The market gluts with VCS titles as retailers dump new games at a loss. The second quarter posts an impossible loss of $300 million. The SEC charges Kasser with insider trading. Although Kasser settles and returns the profits he has to resign from Atari. Losses mount to $2 million per day.
Nolan Bushnell (Atari founder) – After leaving Atari, Bushnell focused on Chuck E. Cheese’s Pizza Time Theatre which had serious financial problems by 1983. Bushnell resigned in ’84 and Chuck E. Cheese declared bankruptcy. Bushnell was scheduled to receive a Pioneer Award at the GDC conference in 20148 but organizers rescinded the award when a public outcry went up protesting Bushnell’s long history of extremely harassing behaviour.
Ted Dabney (Atari founder) – After Bushnell pushed Ted out by threatening to transfer all assets to another corporation, leaving Ted with nothing. Ted did not reveal his side of the story until 2009 in the article “The Unknown Atari Story”. He gave a full interview in 2010 (transcript) and did little else of note in the industry.
Al Alcorn – (Created Pong) – Al left Atari in 1981 but continued consulting for many Silicon Valley startups, including Catalyst Technologies, one of the first tech incubators created by Nolan Bushnell. In ’98 he co-founded Zowie Intertainment where he developed a playset that used a PC to respond to kids playing. In 2011 he co-founded a hackathon for students.
Ray Kassar – (Atari CEO ’78 – ’83) – Before joining Atari, Ray was VP of Burlington Industries, the largest textile company in the world. He did little of note after leaving Atari aside from a photographic viewing at the Santa Barbara Museum of Art culled from his vast collection of turn of the century photographs.
Atari – in ’84 Atari restructured and moved most of its operations overseas. Jack Tramiel buys 51% of Atari. Shortly after Jack fires over 1000 employees, names himself CEO and his son president. Atari fails to license Amiga, Jack rejects an offer to license the Famicom (renamed the Nintendo Entertainment System) and decides to make an Atari PC to compete with IBM.
For the next 10 years Atari produces a number of failed systems and computers, sues Nintendo and loses, goes all in on failed handheld the Lynx, then the failed Jaguar. By ’96 JTS acquires Atari for $50 million freeing the Tramiels. Two years later JTS sells Atari to Hasbro for $5 million in cash. The following year Hasbro unloads Atari to Infogrammes who use the name on video games for modern consoles.
In 2013 the related Atari companies filed for bankruptcy, re emerging as casino game maker Atari Casino with a staff of ten people. In 2017 Atari announced they will be re-entering the console market with Ataribox, a Linux based PC game system.
Dave Otto (creep security chief) – went on to murder six campers while smiling and piping “beautiful” music in an abandoned cabin. <verify – citation needed>