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In the 80s, playing a videogame at home in the UK often meant using a microcomputer. The Commodore 64, the ZX Spectrum and the BBC Micro were all popular among parents for being multi-purpose. Instead of buying a console dedicated solely to games, so the thinking went, why not buy one that could perform multiple tasks and even educate your children.



In America, things were a bit different. While they had microcomputers and educational games, the market was dominated by Atari. Along with other companies like Intellivision and Coleco, they focused on consoles that could only play games.

For a while this strategy worked well and Atari products were popular. At the turn of the 80s Atari’s wood-finish consoles were synonymous with home gaming. But a few years later number of problems began to surface. First and perhaps most disastrously, the financial success of videogames was growing into a bubble. The market became saturated with consoles and games of varying quality, while at the same time their market share was being threatened by the rise of personal computers.

The crash started with two high-profile failures. Pac Man was one of the most popular and successful arcade games of all time, so making a port for the Atari 2600 would seem like a fool-proof money maker. Unfortunately the Atari 2600 was not powerful enough to run the arcade version, so the game had to be downgraded in order for it to run on the home console. The game did not look very good, but wasn’t terrible for Atari standards. However, it was marketed as differing only “slightly from the original”.



Atari made 12 million Pac Man cartridges, assuming that every one of the estimated ten million people who still used their consoles would buy a copy and that two million more would buy a console to play the game. They eventually sold seven million copies, more than any other Atari 2600 game. This meant the game was a retail success, but a financial and critical failure.

For a while Atari could cite the sales of Pac Man to spin the game as a success. Not so for the next high profile disaster for the company. In mid 1982, Atari won the rights to make a console game based on Steven Spielberg’s E.T. The movie was massive, so how could they go wrong?



Eager to have the game out in time for Christmas, Atari allowed only six weeks for development. Due to the popularity of the movie and the then-novelty of a videogame based on a film, initial sales were good. Critics were scathing, however, and players began to return their copies in frustration. Again Atari had made too many cartridges and the bulk went unsold or were returned. The Christmas sales profits were eaten up by the licence fee (around $25 million) and E.T. ended up making a loss for Atari of $100 million. It is commonly referred to as one of the worst games ever made. A million unsold copies of E.T. are rumoured to be buried in a massive landfill in New Mexico, crushed and encased in concrete along with other Atari products.

Atari games now had a reputation for low quality. In 1983 Atari lost over $500 million and the market for videogame consoles collapsed. The stock value of Atari’s parent company, Warner Communications, dropped 35% after Atari announced a cut in predicted revenue increases in late 1982. Warner wiped it’s hands of Atari and chopped up and sold the company in 1984.

During the bubble, Atari had launched a massively ambitious project. Spanning four games and coming with comics made by DC, Swordquest was a new type of game that mixed puzzles with action and an epic story. Each game was filled with clues to a riddle and the reward for solving the riddle was real treasure. The prize for the lucky winner of first game, Earthworld, was the "Talisman of Penultimate Truth," an amulet of solid 18crt gold embedded with diamonds and birthstones representing the Zodiac. Fireworld, the next instalment, rewarded the winner of the contest with the "Chalice of Light," a cup made of platinum and gold and decorated with precious stones.



The third game, Waterworld, was cancelled when the bubble burst. The remaining prizes – a crown, a “philosopher’s stone” and the grand prize of a sword – had already been made, but no one knows what happened to them. The man who bought the consumer division of Atari after the crash was Commodore’s former owner and founder, Jack Tramiel. According to rumour he still owns the remaining treasure, including the sword – valued to be worth $50,000 at the time.

Jack Tramiel is a colourful figure. A survivor of Auschwitz, he was a tough Polish immigrant with a reputation in the industry for being a “monster”. Tramiel was contemptuous of computers for schools and famously said, “We need to build computers for the masses, not the classes". But it was the reliance on multi-purpose computers – that were bought by schools as well as homes – rather than game-dedicated consoles that spared Europe from the North American crash.



Tramiel had played his own part in the crash while at Commodore, engaging in a ruthless and petty price war with a rival that ended with his resignation from his own company. His leadership of Atari Corp in particular has come under criticism for his tough management practices and short-sightedness (how often those two go together). Under Tramiel, Atari was understaffed and overworked, but they managed to release the successful Atari ST personal computer in 1985. After putting out a few lackluster game consoles, Atari closed in 1996.

‘Understaffed and overworked’ soon became the unspoken mantra of videogame development. Today, videogames are made under call centre-style working conditions of gruelling unpaid overtime known as ‘crunching’. The ‘crunch’ is the period of time, maybe three months, when the deadline looms and much work has to be done. Workers go without pay on barely any sleep to get the game finished in time. Crunching has now become standardised to the point of being scheduled in advance.

The kind of hubris that crippled Atari was still detectable in the videogames industry 25 years later. As Lehman Bros. collapsed many influential figures in the videogame world claimed that the industry was “recession-proof”. Videogames still rake in enormous profits, but the question isn’t if the bubble will burst, but when.