For millions of gamers, the video game crash in 1983 is all but a distant memory, something to read about in history books. There is no question that it’s difficult to imagine industry worth hundreds of billions today almost died out entirely four decades ago. Except it almost happened, and had it lasted, the entertainment world might look very different from what it does today.
So, how did this giant industry once come crashing down to the point of near obliteration? The story is about oversaturation, the rise of personal computers, and a Japanese gaming company with a plumber. Let’s look at the great video game crash of 1983 and how it almost upended one of the biggest industries in the world.
The Visual History of the Video Game Crash of 1983
While reading about the history of the great video game crash of 1983 is fun, seeing it play out thanks to YouTube Ahoy is so much better. One of the most important facts that is discussed about how the Atari craze was so popular, retailers were committing money to the company more than a year in advance, which was one of the first dominoes to fall.
When you think about why the video game crash happened, Ahoy rightly points out how the promise of home consoles being as good as arcade games ended up falling short. As soon as Atari started to feel the heat of this disappointment and saw sales start to fall, other brands followed including Intellivision and Coleco, leading retailers to push video games out of stores in favor of more reliable toy products.
What Was the Video Game Crash of 1983?
The most basic explanation is that this was the time when video game sales dropped 97% from $3.2 billion in 1982 to $100 million by 1985. As the world gave rise to Atari and a dozen other consoles, the industry exploded on the scene, and parents and kids gobbled up consoles just as quickly as they hit store shelves. Unfortunately, it was too much of a good thing as consumers had too many consoles to choose from, creating significant confusion for would-be buyers.
Eventually, the video game market was bound to hit a breaking point, and that’s precisely what happened in 1983. Almost overnight, the industry was decimated, leading to the bankruptcy of many video game console manufacturers and unsold games destined for landfills in the desert. The abrupt end of the second generation of American console video gaming led many analysts to think the game console war was forever over.
Rest assured that, as much as rumors would have you believe, the release of E.T. The Extra-Terrestrial for the Atari 2600 was not the main cause of the 1983 crash.
What Caused the Video Game Crash of 1983?
Although many historians like to point at one factor over another, the reality is that there wasn’t a single primary reason the video game crash of 1983 occurred. Instead, it was caused by a combination of factors leading to the same industry implosion.
Oversaturation
In today’s video game world, and for the last twenty years or so, the industry has been dominated by a small number of players like Microsoft, Sony, and Nintendo. However, in 1983, the industry gave way to dozens of console choices from the likes of Atari, ColecoVision, Intellivision, Vectrex, Bally Astrocade, Magnavox Odyssey 2, and more.
For example, the game Q-Bert, available on nine consoles in 1982, with barely any differences between its various console releases. There were very few console exclusives as we know them today, which meant differentiation between consoles was almost nonexistent.
This meant that you could buy a console for your home, your friends purchased another, and, while you might have the same game title, you couldn’t play them together. It caused significant frustration for parents who were also flooded with too many games and not very good ones. There was a considerable oversaturation of games, and many were of inferior quality and were rushed to market.
Executives at Mattel, manufacturers of the Intellivision console, once acknowledged they released two years’ worth of products into their sales channels during a one-year period, and something had to give. Retailers simply didn’t have enough shelf space to support all of the available consoles and the huge libraries of games that were constantly growing bigger.
The Rise of Personal Computers
Whereas PC gaming and consoles peacefully (sometimes!) co-exist in today’s gaming world, that wasn’t the case in the early 1980s. As personal computers started to become inexpensive enough to own, sales grew, and as a result, so did their gaming abilities.
The rise of personal computers saw games like the original Microsoft Flight Simulator and Lode Runner come to life. Parents saw far more potential in buying computers that could be used for multiple tasks beyond gaming, like word processing and keeping track of expenses.
What is often ignored about the rise of personal computers is that a price war broke out to get to the bottom as manufacturers wanted to usurp the video game console in the home. To do that, they had to get prices down to the same level as video game consoles, creating a price war that would lead parents and console buyers to choose either a personal computer or a video game console.
Poor Gaming Quality
While E.T. The Extra-Terrestrial may be considered the worst video game of all time, it’s hardly the only bad game to release in the early 1980s. There was a mad rush to release as many games as possible for all of the various consoles available in the early 1980s, and, as a result, quality assurance was almost non-existent.
Video game companies like Atari wanted to increase revenues, as consoles were often sold at a loss. The result was shorter development cycles than required and little to no playtesting before going to market. This led to near-unplayable games 1982, quickly turning off millions of gamers who were otherwise big video game buyers.
Consumer Confidence
Ultimately, all the above factors came to a head, resulting in the video game crash. No single day can be pointed at as a turning point, but consumer confidence quickly dropped across this period. The lack of quality of gaming titles turned off buyers, who quickly turned their attention to PC gaming, where stricter quality standards existed.
Immediate Impact of the Video Game Crash of 1983
Looking back, the video game crash in 1983 is a stark reminder for the current industry of what can happen if strict guardrails are ignored. During this period, Atari lost more than $350 million and laid off more than one-third of its staff. While it would release more consoles in the future, it never recovered financially or regained its market position.
Magnavox would abandon the video game business entirely. Imagic, a video game developer, was forced to cancel its IPO the day before it was set to go live on the stock market. ColecoVision would be pulled off the market in 1985, and similar stories played out repeatedly across the industry. Retailers flying high off the back of huge video game sales also folded.
The Video Game Industry Bounces Back
You already know how the story ends, as video games are a massive part of today’s entertainment world. However, back in 1985, there was little uncertainty about whether the industry would recover. As it turns out, the industry recovered, and there are two major reasons.
Personal Computers
Albeit the less critical of the two reasons that helped the video game industry recover, the continued sale of personal computers helped. Video game developers like Activision and Electronic Arts could keep making games for personal computers from Commodore and Tandy to maintain revenue streams.
Nintendo Entertainment System
At the same time, a video game crash occurred in the U.S. The Japanese game industry was shifting its focus from arcade gaming to home consoles. The release of Nintendo’s Famicom system in Japan was a huge hit, with 19% of Japan’s population owning at least one Famicom system at the time. As a result, Nintendo set its eyes on North America.
However, to bring its console to the U.S. market, it had to market it as anything but a video game console. This was named Nintendo Entertainment System, which sounds like anything but a video game console. As retailers pushed back against adding another video game console to their store shelves, still reeling from the crash, Nintendo gave up the Famicom name entirely in the U.S.
Nintendo would help restore consumer confidence by creating its “Seal of Quality,” which required developers to go through Nintendo for approval and pay to release their games on the NES. Nintendo also forced developers to scale back on the volume of their releases, limiting each developer to only five games for the NES per year.
As the story goes, Nintendo was successful, and by 1989, the video game market in the U.S. had grown to more than $5 billion in sales. Nintendo was selling millions of consoles and had a dominant market position that gave way to the TurboGrax16 and the Sega Genesis. The rest, as they say, is history.
Legacy of the 1983 Video Game Crash
The rise of the Nintendo Entertainment System has seen the video game industry at large make every effort to avoid repeating past mistakes. Thankfully, over the last 30 years, Nintendo, Sega, Sony, and Microsoft have worked hard at controlling the supply of games available for their respective consoles.
Whereas quality control was an afterthought in the early 1980s, today, it’s the cause of many game delays to ensure when a title is released. It’s as bug-free as possible. As annoying as that might be for fans looking forward to releases of upcoming games, the worst thing a developer can do is release a game before it’s ready.
Because of these quality controls, the video game industry is now an entertainment behemoth. Consoles and games are consistently at the top of holiday wish lists, and the industry is projected to grow to more than $500 billion in total revenue by 2030.
Could There Be Another Video Game Crash?
It’s possible but unlikely. As we mentioned above, some factors that contributed to the 1983 Video Game Crash were the oversaturation of the market, poor-quality games, and significant technological changes. Any of these could happen, but it’s unlikely they would all happen simultaneously, like in 1983.
Of course, corresponding factors could help prevent another crash. Some of these include but are not limited to, mobile gaming, which currently earns more revenue than console and PC gaming combined. Because of the meteoric rise of mobile gaming, the market itself has diversified in a big way, well beyond the traditional “gamer” persona, which will help reduce the risk of oversaturation.
You also have a consideration around digital downloads, which have made it easier for consumers to purchase games and make them more accessible to gamers.
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