Lizzy Finnegan said:
E.T. the Extra-Terrestrial Was the Most Important Video Game Ever Made
Once upon a time, a game so awful was created that it simultaneously destroyed - and saved - the entirety of the video game industry.
Read Full Article
Lizzy, honestly I don't understand what kind of research you did with this article. It's like you took every already disproven myth in passing and dumped it into this. Fist, unlike what the URL states, it was a New Mexico landfill not Arizona (and I'm aware the article itself states New Mexico, but you might want to get that fixed). Second it wasn't an "ET burial." ET just happened to be part of the mix of games buried there, and even then it wasn't even a disposal of bad games. Alamogordo was a burial of games returned as part of Atari's stock exchange credit program with retailers. There were 750,000 games in this lot comprised of over 60 titles across two platforms (2600 and 5200). ET was just a very small portion of the 750,000. Here's my public interview with the man that buried the product there for Atari, done several months ago:
https://www.youtube.com/watch?v=6A-aE5bAKkw
Likewise, ET had zip to do with the crash or problems at Atari, it was just a symptom not the problem (hint: even the Game Over documentary discusses this with the people directly interviewed saying the same thing). The problems at Atari had already been in play before ET was even started. Likewise, Atari's projected increase in sales were not in any way based on ET, it was based on the false projection for all their titles that year. They forced retailers to order for most of the year at once because of the shortages the previous year, and then reported the sell in numbers instead of sell through (the former is the number sold to retailers, the latter the number actually sold to consumers) to pump up sales figures. ET was barely out a week when the Dec. 7th, 1982 earnings report was released, it had zero impact on it and wasn't even part of any of the quarters being reported on. That earnings report then resulted in a tech stock crash across the rest of December '82, which is the actual start of the crash, as all the rest of the big consumer video game companies were also hit disastrously, resulting in layoffs in the beginning of 1983. Most of those competitor companies were gone from the industry within the year (such as Mattel Electronics). Compounded with an explosion of new smaller companies that started in summer '82, by '83 you had an even more crowded market, made even worse by the mishmash of quality of a lot of it. That's what made the industry and market problems continue to worsen in '83. Key word being continue.
Here's a summary on the "crash" (it was a North American industry crash which then culminated in a market crash at the end. Industry and market are two different things):
Regarding a little more of the background of what was going on at Atari during the time, Atari's actual internal implosion began during spring of '82. They were hit one after the other on two main fronts, Coin and Consumer. Most people don't realize there wasn't one main crash at the time but separate industries that had crashes in them (just as there was no actual "video game" industry then, but rather separate industries (coin, consumer, computer) that had video games in them). Coin itself had been going though it's own industry shakeout starting in early '82 as the explosion of new operators at non-traditional locations started tailing off and then shrinking dramatically. The actual customers in the coin industry are the people that buy the machines, the distributors and operators (operators being the people who put the machine on location and rent out time to the players, who are in turn their customers). Starting in '79 (thanks to Space Invaders and the succeeding golden age titles of that period), there had been an explosion in demand for video coin-ops by non-traditional operators such as gas stations, doctor offices, department stores, etc. (Traditional being bars, bowling alleys and arcades). Many of these first time buyers and renters (from distributors) discovered what more traditional operators already knew: while there was a lot of money to be made initially, these coins had a limited shelf life and they were stuck either trying to sell the one they had to get the next big game or if rented from a distributor stuck with continually having to lease a new game. So by early '82 they started leaving the market in droves, which started to hit the Coin industry hard. The shakeout lasted through '83 and a lot of companies in that industry either folded or merged with others. By the end of the year the Coin industry was stable but smaller.
Consumer was another matter. Since 1980, Atari's Consumer Division was the golden child of the company as far as Warner was concerned, and Warner did everything in it's power to bolster that division and in turn bolster it's own earnings and stock. Unfortunately it lead to some bad practices like a dual management (where Warner management would often supersede Atari's own management and their decisions) and a lack of any good logistics practices. In fact Warner's other divisions (such as Warner's Music group) had been warning that Warner needed to have Atari adopt the same manufacturing and tracking practices as the music industry. It fell on deaf ears because Warner Communications couldn't see their cash cow declining, and their position on the matter was only solidified even more in 1981 when a shortage of 2600 cartridges for retailers occurred. In fact they were so in demand that retailers were stealing extra boxes from Atari's distribution warehouses when picking up stock, and even organized crime was hijacking shipments. You see, the Consumer industry had also gone through a tremendous amount of growth since the late 70s similar to Coin, expanding beyond the traditional toy stores and toy departments of major retailers into anyone that carried consumer electronics of any type. So towards the end of '81 Atari (under continued pressure from Warner to meet their exceptional growth standards) used the issues from 1981 to pressure retailers to place their orders for the entire year of '82 at once. And to compound the issue, Atari used their sell in numbers to report their quarterly earnings and overall projected earnings for the year. ("Sell In: is the numbers of units shipped to retail. "Sell through" is the total number of units sold to a consumer.)
Alarm bells continued to be rung at Warner's other divisions and even their financial partners that things were not sustainable to this magnitude. But it continued to fall on deaf ears until it was too late and they already had a major problem to deal with. By the end the beginning of the summer of' 82 Atari management became aware that their distribution warehouses around the country were packed to the brim with stock that wasn't moving. It was further compounded with retailers canceling orders or starting look to do returns for credit (a common practice in the retail industry were product is either taken back for credit or subsidized for markdown). Warner management became aware of it not long after, and the response from both companies was to try and keep it hidden and play games by changing report dates and extending their 4th quarter. The matter was made even worse as more competing companies entered the market that year to further dilute the market and of course there was the recession. Gordon Crawford from Capitol Group (major investors in both Warner and Atari and responsible for helping bring the two together) mentioned at the time "At the January (1982) Consumer Electronics Show, there were three or four new video hardware systems and about 50 new software systems - all the warning lights went on for me. Then, at the June CES show, it was worse! There were about 200 new software systems. This was a business that the year before it had essentially been a monopoly, and now there were hundreds of new entrants. By this time, Warner was almost a game stock."
Then Warner and Atari couldn't hide what was a happening any longer, and on December 7th (kind of ironic) announced their earnings had been lower than projected. Atari was 80% of the Consumer industry at that time, and when something that large announces earnings problems (especially when analysts had been predicting this was all a bubble ready to burst) you're going to hurt everyone, and shockwaves immediately went through the rest of the Consumer industry. The entire month of December was a downward moving roller coast for those that were publicly traded. By January '83 the layoffs began and throughout the rest of the year companies that had just opened the year before started shuttering. By the end of the year, even larger companies like Mattel announced they were exiting video games.In late '83 through early '84 Warner fended off a hostile takeover from Murdoch, and started looking to divest itself of companies that were making it weak. Atari was at the top of the list. Nobody would take the company, so they began looking to junk it and sell off parts. Warner head Steve Ross cold called Jack Trramiel about taking Atari's Consumer Division assets, and the two struck a deal in early July '84. Jack took the assets and folded them into his TTL company, which he in turn renamed to Atari Corporation. The remaining portion of Atari Inc. (the Coin Division, Ataritel, and several other divisions) was immediately renamed Atari Game Corp. and paired down over the rest of the year to just the profitable part, Coin (since as mentioned that had stabilized and was in an upturn) which had majority ownership sold to NAMCO.
Anyways, this Consumer issue is of course what people usually refer to when they talk about "the crash," though keep in mind it was really a North American phenomenon. Japan had it's own industry (largely driven by Nintendo and Sega at that time) and Europe was mostly a computer driven market (Sinclair Spectrum series, BBC, Commodore...). Additionally, myths continue to remain about the state of the market during '84 and '85.
