video game crash of 1983 part of a series on thehistory of video games general early history of video games early mainframe games golden age of arcade video games video game crash of 1983 consoles 1st generation 19721980 2nd generation 19761992 3rd generation 19832003 4th generation 19872004 5th generation 19932005 6th generation 19982013 7th generation 20052017 8th generation 2012 genres history of eastern roleplaying video games history of western roleplaying video games history of online games history of massively multiplayer online games lists list of video games in development timeline of arcade video game history vte the video game crash of 1983 known as the atari shock in japan was a largescale recession in the video game industry that occurred from 1983 to 1985 primarily in north america the crash was attributed to several factors including market saturation in the number of game consoles and available games and waning interest in console games in favor of personal computers revenues peaked at around 32 billion in 1983 then fell to around 100 million by 1985 a drop of almost 97 percent the crash was a serious event that brought an abrupt end to what is retrospectively considered the second generation of console video gaming in north america the crash shook the thenbooming industry and led to the bankruptcy of several companies producing home computers and video game consoles in the region it lasted about two years analysts of the time expressed doubts about the longterm viability of video game consoles and software the north american video game console industry recovered a few years later mostly due to the widespread success of the nintendo entertainment system nes in 1985 nintendo designed the nes as the western branding for its famicom console originally released in 1983 to avoid the missteps that caused the 1983 crash and avoid the stigma that video games had at that time causes and factors atari 2600 the most popular console prior to the crash prior history prior to 1982 the most significant home console was the atari 2600 along with numerous dedicated singlegame consoles such as variants of pong the atari 2600 was launched in 1977 but in its first few years had modest sales in 1980 atari created a licensed version of space invaders from taito which became known as the killer application for the console sales of the atari 2600 quadrupled and the game was the first title to sell more than a million copies flooded console market spurred by ataris success there were many consoles introduced on the market including the atari 2600 atari 5200 colecovision odyssey and the intellivision in addition to this mattel and coleco created devices that allowed them to play atari2600 games on their consoles and others created atari 2600intellivision clones such as the coleco gemini the sears telegames systems privatelabeled versions of the atari 2600 and intellivision and tandyvision an intellivision clone for radio shack each of these consoles had its own library of games produced by the console maker and many had large libraries of games produced by thirdparty developers in 1982 analysts noticed trends of saturation mentioning that the amount of new software coming in will only allow a few big hits that retailers had too much floor space for systems along with price drops for home computers could result in an industry shakeup in addition the rapid growth of the video game industry led to an increased demand for video games but which the manufacturers overprojected an analyst for goldman sachs had stated in 1983 that the demand for video games was up 100 from 1982 but the manufacturing output increased by 175 creating a surplus in the market competition from home computers see also history of personal computers the commodore 64 survived the crash and went on to become one of the best selling computers of all time the first microcomputers such as the altair 8800 and apple i were marketed to a niche of electronics hobbyists as most required assembly from a kit in 1977 factoryassembled machines with basic in rom became available including the trio of 77 the apple ii commodore pet and trs80 model i the latter two retailed for under 1000 but lacked game joysticks and highresolution color video thirdparty developers created games for all of these platforms the trs80 benefited from radio shacks retail stores which displayed computers and accessories locally in an era where many personal computers were mailordered from manufacturers in 1979 atari unveiled the atari 400 and 800 computers built around a chipset originally meant for use in a game console and which retailed for the same price as their respective names in 1981 ibm introduced the ibm 5150 pc with a 1565 base price by 1983 consumers found that most predicted uses of home computers were unrealistic except for games children used most home computers because computers generally had more memory and faster processors than a console they permitted more sophisticated games they could also be used for tasks such as word processing and home accounting games were easier to duplicate since they could be packaged as floppy disks or cassette tapes instead of rom modules though some cassettebased systems retained rom modules as an instanton option this opened the field to a cottage industry of thirdparty software developers writeable storage media allowed players to save games in progress a useful feature for increasingly complex games which was not available on the consoles of the era in 1982 a price war began between commodore and texas instruments and home computers became as inexpensive as videogame consoles the company offered competitive upgrades where rival systems could be traded for a discount toward the purchase of a commodore 64 commodores ownership of chip fabricator mos technology allowed manufacture of integrated circuits inhouse so the vic20 and c64 sold for much lower prices than competing home computers ive been in retailing 30 years and i have never seen any category of goods get on a selfdestruct pattern like this a service merchandise executive told the new york times in june 1983 by that year gutman wrote video games were officially dead and computers were hot he renamed his magazine computer games in october 1983 but i noticed that the word games became a dirty word in the press we started replacing it with simulations as often as possible soon the computer slump began suddenly everyone was saying that the home computer was a fad just another hula hoop computer games published its last issue in late 1984 inflation the us game industry lobbied in washington dc for a smaller 1 coin closer to the size of a quarter arguing that inflation which had reduced the quarters spending power by a third in the early 1980s was making it difficult to prosper during the 1970s the dollar coin in use was the eisenhower dollar a large coin impractical for vending machines the susan b anthony dollar was introduced in 1979 and its size fit the video game manufacturers demands but it was a failure with the general public ironically the new coins similarity to the quarter was one of the most common complaints in canada existing dollar bills were removed from circulation and replaced with coins in 1987 arcade machines in japan had standardized the use of 100 coins worth roughly 1 which industry veteran mark cerny proposed as a reason for the stability of the game industry in japan loss of publishing control in 1979 activision became the industrys first thirdparty developer this court case legitimized thirdparty development encouraging companies such as quaker oats with their us games division to rush to open videogame divisions hoping to impress both stockholders and consumers until 1982 few thirdparty console games existed other than activisions imagic and games by apollo demonstrated their own 2600 cartridges in january 1982 and coleco announced several 2600 and intellivision games parker brothers cbs video games and mattel also announced 2600 cartridges at the february toy fair and coleco announced the colecovision at the summer 1982 consumer electronics show 17 companies including mca inc and fox video games announced 90 new atari games the new companies reduced ataris share of the cartridgegame market from 75 in 1981 to less than 40 in 1982 companies lured away each others programmers or used reverse engineering to learn how to make games for proprietary systems atari even hired several programmers from mattels intellivision development studio prompting a lawsuit by mattel against atari that included charges of industrial espionage despite the lessons learned by atari in the loss of its programmers to activision mattel continued to try to avoid crediting game designers rather than reveal the names of intellivision game designers in a 1981 tv guide interview mattel instead required that they change their names to protect their collective identities in the second half of 1982 the number of cartridges grew from 100 in june to more than 400 in december experts predicted a glut in 1983 with 10 of games producing 75 of sales by september 1983 the phoenix stated that 2600 cartridges is no longer a growth industry activision atari and mattel all had experienced programmers but many of the new companiesrushing to join the marketdid not have the expertise or talent to create quality games titles such as chase the chuck wagon about dogs eating food funded by the dog food company purina skeet shoot and lost luggage were examples of games made in the hopes of taking advantage of the videogame boom fallout effects immediate effects the release of so many new games in 1982 flooded the market most stores had insufficient space to carry new games and consoles as stores tried to return the surplus games to the new publishers the publishers had neither new products nor cash to issue refunds to the retailers many publishers including games by apollo and us games quickly folded by june 1983 the market for the more expensive games had shrunk dramatically and was replaced by a new market of rushedtomarket lowbudget games a massive industry shakeout resulted magnavox abandoned the video game business entirely imagic withdrew its ipo the day before its stock was to go public the company later collapsed partiallysurviving cases and cartridges retrieved during the 2014 excavation of the alamogordo new mexico landfill atari had used in 1983 et centipede and other atari materials can be seen one of the more predominant effects of the 1983 crash was on atari in 1982 it had published large volumes of atari 2600 games that they had expected to sell well including a port of pacman and game adaption of the film et the extraterrestrial however due to the quality of these games and other market factors much of ataris production did not get sold in september 1983 atari discreetly buried much of this excess stock as well as unsold stock of earlier games in a landfill near alamogordo new mexico though atari did not comment about their activity at the time misinformation related to sales of pacman and et led to an urban legend of the atari video game burial that millions of unsold cartridges were buried there gaming historians received permission to dig up the landfill as part of a documentary in 2014 during which former atari executives clarified that only about 700000 cartridges had been buried in 1982 backed by estimates made during the excavation and disproving the scale of the urban legend despite this ataris burial remains an iconic representation of the 1983 video game crash as a result while some stores sold new games and machines most retailers stopped selling video game consoles or reduced their stock significantly reserving floor or shelf space for other products this was the most formidable barrier that confronted nintendo as it tried to market its famicom system in the united states retailer opposition to video games was directly responsible for causing nintendo to brand its product an entertainment system rather than a console using terms such as control deck and game pak as well as producing a toy robot called rob to convince toy retailers to allow it in their stores furthermore the design for the nintendo entertainment system nes used a frontloading cartridge slot to mimic how video cassette recorders popular at that time were loaded further pulling the nes away from previous console designs the crash also affected video game arcades while the number of arcades in the united states had doubled to 10000 from 1980 to 1982 the crash lead to a closure of around 1500 arcades and revenues of those that remained open had fallen by 40 the full effects of the industry crash would not be felt until 1985 the end of the crash allowed commodore to raise the price of the c64 for the first time upon the june 1986 introduction of the commodore 64ca commodore 64 redesigned for lower cost of manufacturewhich compute cited as the end of the homecomputer price war longterm effects following the crash nintendo became the market leader in america with the nintendo entertainment system with japanese companies dominating the market for years to come see also history of video game consoles third generation the north american video game crash had two longlasting results the first result was that dominance in the home console market shifted from the united states to japan by 1986 three years after its introduction 65 million japanese homes19 of the populationowned a family computer and nintendo began exporting it to the us other japanese companies also rivaled nintendos success in the united states with segas mega drivegenesis in 1989 and necs pc engineturbografx 16 released the same year a second highly visible result of the crash was the advancement of measures to control thirdparty development of software using secrecy to combat industrial espionage had failed to stop rival companies from reverse engineering the mattel and atari systems and hiring away their trained game programmers while mattel and coleco implemented lockout measures to control thirdparty development the colecovision bios checked for a copyright string on powerup the atari 2600 was completely unprotected and once information on its hardware became available little prevented anyone from making games for the system nintendo thus instituted a strict licensing policy for the nes that included equipping the cartridge and console with lockout chips which were regionspecific and had to match in order for a game to work in addition to preventing the use of unlicensed games it also was designed to combat software piracy rarely a problem in the united states or western europe but rampant in east asia accolade achieved a technical victory in one court case against sega challenging this control even though it ultimately yielded and signed the sega licensing agreement several publishers notably tengen atari color dreams and camerica challenged nintendos control system during the 8bit era by producing unlicensed nes games the concepts of such a control system remain in use on every major video game console produced today even with fewer cartridgebased consoles on the market than in the 816bit era replacing the security chips in most modern consoles are specially encoded optical discs that cannot be copied by most users and can only be read by a particular console under normal circumstances released in 1988 the sega genesis was the first real challenger to nintendos market dominance in north america nintendo reserved a large part of nes game revenue for itself by limiting most thirdparty publishers to only five games per year on its systems some companies tried to get around this by creating additional company labels like konamis ultra games label nintendo would ultimately drop this rule by 1993 with the release of the super nintendo entertainment system it also required all cartridges to be manufactured by nintendo and to be paid for in full before they were manufactured cartridges could not be returned to nintendo so publishers assumed all the financial risk of selling all units ordered as a result some publishers lost more money due to distress sales of remaining inventory at the end of the nes era than they ever earned in profits from sales of the games nintendo portrayed these measures as intended to protect the public against poorquality games and placed a golden seal of approval on all licensed games released for the system further nintendo implemented its proprietary 10nes a lockout chip which was designed to prevent cartridges made without the chip from being played on the nes the 10nes lockout was not perfect as later in the ness lifecycle methods were found to bypass it but it did sufficiently allow nintendo to strengthen its publishing control to avoid the mistakes atari had made in the long run this pushed many western thirdparty publishers such as electronic arts away from nintendo consoles and would actively support competing consoles such as the sega genesis or sony playstation most of the nintendo platformcontrol measures were adopted by later console manufacturers such as sega sony microsoft and intellivision entertainment although not as stringently demaria rusel wilson johnny l 2003 high score the illustrated history of electronic games 2nd ed new york mcgrawhillosborne isbn0072224282 gallagher scott park seung ho 2002 innovation and competition in standardbased industries a historical analysis of the us home video game market ieee transactions on engineering management vol 49 no 1 february 2002 pp6782 doi 10110917985749 1980s portal video games portal the dot eaterscom chronicle of the great videogame crash twin galaxies official video game pinball book of world records the golden age of video game arcades story within the 1998 book classic gaming expocom biographies and history of the era intellivisionlivescom official intellivision history by the original programmers the history of computer games the atari years by chris crawford a game designer at atari during the crash pctimelineinfo chronology of the commodore 64 computer events game release dates 19821990 vtehistory of video gamesby system golden age of arcade video games timeline of arcade video game history video game crash of 1983 early mainframe games by yearearly history 19471972 1970s 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980s 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990s 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000s 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010s 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020s 2020 near future by console generation first 19721980 second 19761992 third 19832003 fourth 19872003 fifth 19932005 sixth 19982013 seventh 20052017 eighth 2012 by region australia bangladesh belgium brazil canada china czech republic colombia finland france germany ghana india indonesia ireland lithuania japan kenya malaysia netherlands new zealand nigeria philippines russia south africa south korea thailand turkey ukraine united kingdom united states vtevideo game consoles second generationtypes home video game console list handheld game console list microconsole list dedicated console list generations first 197280 second 197692 third 19832003 fourth 19872004 fifth 19932005 sixth 19982013 seventh 200517 eighth 2012present secondgenerationhome apfmp1000 arcadia 2001 atari 2600 atari 5200 bally astrocade colecovision epoch cassette vision fairchild channel f interton vc 40001292 advanced programmable video system intellivision odyssey rca studio ii vectrex super vision 8000 vtech creativision handheld milton bradley microvision entex selectagame entex adventure vision palmtex portable videogame system super micro epoch game pocket computer dedicated nintendo game watch first generation third generation emulator game history list manufacturer 