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Atari Inc.

Atari, once a renowned player in the world of video games, is now virtually non-existent. Apart from the Atari 2600 home console, millennials and those of Generation X have probably not even heard of Atari in the context of video games. The erstwhile arcade giant has been reduced to a ghost of itself through a number of mergers, acquisitions, and financial losses. However Atari has been the forefather of gaming and has made a major contribution towards the gaming industry of today.

In the 1970s and through the 80s, Atari has been one of the pioneers, and a major formative influence on both arcade games and personal computers. Along with games like Pong, Centipede, Tempest and E.T, Atari has been responsible for inventing the arcade video game cabinet. Thus the modern arcade culture owes its beginning to the founders of Atari.

Atari Inc. has been subjected to so many corporate changes that it is extremely difficult to chronicle its history and story. Atari Inc. was the brainchild of a man with one brilliant idea. The company was founded by Nolan Bushnell and Ted Dabney. They met in California in 1969, as co-employees of the Apex company in Redwood.

Bushnell had a hankering after video games after being introduced to Spacewar, one of the first games of its kind. Spacewar had been developed at the Massachusetts Institute of Technology by Professor Steve Russell and his students. Bushnell, then an Electrical engineering student at the University of Utah, would steal into the computer lab along with his frat brother at night in order to try his hand at the game. The University of Utah was one of the pioneering institutes when it came to gaming. In the 1960s, Ivan Sutherland had invented computer graphics at the Utah University in 1960 and the University had excellent computer and technology infrastructure. Bushnell was one of the privileged few who had access to computers and games.

During his days at the University of Utah, Bushnell took up a summer job at an amusement arcade named Lagoon Amusement Park. It was here that the life-changing idea struck him. He realised that a coin-operated machine apparatus could be used with a video game. Arcade games in those days consisted of pinball, ball-throwing games, chance games and slot machines, all activated by coin-operating machines. Bushnell’s great idea allowed him to dream of an amusement arcade with wonderful video games, all in coin-operated gaming cabinets, and excited teenagers! His vision was that of the 1980’s arcade!

Those were the days when arcade games were considered the devil’s spawn and were shunned by well-meaning parents. Rebellious children hung around pinball arcades and parents tried their best to dissuade them. Parents revolted against pinball machines and felt that they were a bad influence on their children’s well-being. In fact pinball machines became illegal in various states in the US. In New York, the then Mayor seized all pinball machines and had them salvaged for raw material for the war effort. New York continued its law against pinball machines well into the 70s. It was at such a time that Bushnell envisioned his world of arcade video games!

Bushnell and Ted Dabney founded their company in 1971. Initially, they named it Syzygy Co, but since the name was already operational in California, they renamed the company Atari, Inc. in 1972. The name Atari is derived from the Japanese word ‘ataru’ which means ‘to hit a target’. Bushnell was inspired by the Japanese game of ‘Go’, which uses the word ‘ataru’. In the game, the word is used just like we use the word ‘Check’ in chess. It means that one is close to winning! The name also stands for good fortune. Before deciding on Atari, they had considered two more names – ‘Sente’ and ‘Hane’.

During the ‘60s, computers were as large as small rooms, and it was only in the late ‘60s that the duo were able to counter these difficulties. They created the first coin-operated arcade video game called ‘Computer Space’. It was released to the public in 1971 by a company named Nutting Associates. The game was not a success by any measure, however it managed to sell 1500 machines. Bushnell and Ted Dabney managed to earn enough to continue working on their idea.

Soon Ted Dabney invented a revolutionary new technology called the Spot Motion Circuit. The new technology could move dots across the screen, without the aid of an expensive computer processor. Therefore it was much cheaper and easier to manufacture than ‘Spacewar’, which required supercomputers to run. Game cabinets began to be mass-produced and thus was the first arcade game born.

Although ‘Computer Space’ was the first commercial video game, Atari’s first video game was the real trendsetter. It paved the way for the swift popularization of the arcade game. In 1972, the Magnavox Odyssey, which was the first home console was released. It was a beige plastic box loaded with a number of silent games like Table Tennis. The game was fairly successful and sold well in North America and Europe where it had been released. Bushnell went to a demonstration of the Magnavox Odyssey game, even though he had probably played quite a few similar Tennis games at the University of Utah.

The older tennis games disappeared without a trace and it took Atari’s Pong, a game released in 1972, to really hit the mark. The game was created by a newly-hired employee Al Alcorn. He was a junior engineer and a colleague of Bushnell’s at Apex. Al had not even seen a video game and was asked to develop a game as a way of testing his skills. The project was only expected to be a practice-project, however after working on it for a couple of months, the company realised that it was shaping to be a fun game. Pong was more superior to Magnavox in subtle but important ways. The ball could be hit at various angles to affect its trajectory, the speed of the ball increased over the game length and the game had sound capability. Also due to a design fault the border around the screen had gaps at the top and bottom. This ensured that the ball slipped in many-a-times and therefore no game could continue infinitely. The game popularized digital tennis and made it a fun game!

The first Pongo arcade cabinet was installed in Andy’s Tap Tavern, a local bar where Bushnell was friendly with the owner Bill Gattis. The first cabinet was painted orange and had a black-and-white TV installed in it. Pong became a huge hit especially with the layman, who had found Computer Space too complicated. It raked in a decent haul and had people coming in just to play! Funnily enough it broke down soon after it was installed and Al was called to solve the problem. He found that the coin receptacle, which was a milk jug, was brimming with coins and had thus got stuck!

Bushnell had approached two major game manufacturers – Bally and Midway, for Pong, but then decided against it. Instead he decided to let his own company Atari, Inc. produce the machines. It was extremely difficult to get enough financial support especially since Pong was very like the infamous Pinball. Eventually however, Atari collected enough capital to set up an assembly line and began mass-producing the gaming cabinets. The manufacturing process was quite slow and Pong machines began to be sold towards the end of 1972. By 1973, they began to be transported across the world too.

The game was tremendously successful. The Pong units earned so much money that Atari, Inc. had to send representatives to collect bags and bags of collected coins. A single Pong machine earned around $40 per day. An employee Steve Bristow, recounts carrying huge 30-pound bags full of coins every day to his car, while his wife accompanied him, armed with a hatchet for safety! In the meantime, he sales figures were reaching new heights. In a single year, over 2500 machines were sold and by the end of 1973 , nearly 8000 machines were sold and operational. According to Al Alcorn, only 12000 yellow Pong cabinets were manufactured. Due to their rarity, these cabinets are now prized collectibles.

The Pong game brought a lot of exposure to the company and the world of video games in general. Hitherto, video games were the domain of an elite few and were only available in University labs and computer establishments. With the invention of the arcade game box, video games became accessible to the masses. They began to be seen in bars, cafes, public houses, and pizza parlours and a variety of people were seen playing them.

The next big game –Space Invaders was the one to convert arcade gaming into a profitable and cultural phenomenon, but it was Pong that set the stage. In 1975, the first home version was released just before the holiday season in America. It was available in Sears and sold 200,000 gaming units in that year. Judging by its popularity, one would assume that a large number of Pong machines existed in the market. However it was not so. Most gamers who grew up on home consoles would estimate that at least half a million Pong machines should have been sold in those days. This is not true because of an interesting glitch! Atari did not own a patent to the popular Pong game. Patents took a very long time to get issued in that era. By the time Atari could get their invention patented, a number of cheap rip-offs had entered the market in the form of home consoles. Thus most people today have played the unauthorized clone-versions of the game rather than the real Atari Pong game. Unbeknownst to Atari however, Magnavox, the developers of the Table Tennis game and the Odyssey, had a patent.

This led to a lawsuit against Atari, Inc. Ralph Baer, the inventor of the Odyssey pushed his employer to file a lawsuit against Atari, Inc. Ralph was an employee of one of the major video game manufacturers. The lawsuit stated that Bushnell had stolen the idea for the Pong game from a demonstration he attended in 1972. The demonstration was for a game of Table Tennis and a guest book with Bushnell’s sign on it was uncovered and presented as evidence. Bushnell preferred not to take the matter to court and the two parties decided on an out-of-court settlement. Atari paid Magnavox a figure between $400,000 to $1m in settlement and gained the right to licence Magnavox. Atari could now continue to manufacture Pong without any legal issues. Moreover Magnavox had to spend time and money in finding the imitators who were infringing on their patent. While Atari could devote its time to developing new games, Magnavox spent its energy prosecuting patent violators. Thus settling out of court was a good move for Atari, Inc.

Although Atari’s success was immense, it was not due to true innovation. As Ralph Baer often pointed out Bushnell did not invent anything. What he did was, to start a movement. He spurred the entire video game industry. He discovered and developed a commercially viable model for video games. In retaliation to Pong imitations, Bushnell developed a host of new video games like Space Race, Gotcha, Tanks and Break-out. Atari also released four-player variations and sequels of the Pong game. Interestingly Break-out was developed by the then college-students - Steve Wozniak and Steve Jobs, and was funded by Alcorn!

Although Atari continued to grow, they hit a few snags during the ‘70s. 1974 was an especially bad year for the company. Bushnell nearly exhausted the funds of the company by expanding into overseas markets too hastily. He also invested heavily in the unsuccessful and highly complicated game Gran Trak 10. The company continued to stay afloat due to the immense success of the arcade sensation – Tanks. Atari also got into a merger with its sister company Kee Games, which had split from the main body due to exclusivity issues.

Bushnell bought over Ted’s share of the company and sold Atari, Inc. to entertainment giant Warner Communications in a mammoth deal of $28 million. Bushnell was rumoured to have received $15 million in his personal kitty. Bushnell’s management at the company soon came to an end. The last of Bushnell’s regime saw the release of the home game console Atari 2600.

The development of the Atari 2600, formerly known as Atari VCS began in 1975. Atari wanted to release all its games for the home console and the project was codenamed Stella. The home-computing revolution began with the introduction of the MOS 6052, which was the first inexpensive microprocessor. The ROM was also a recent technological advancement that allowed a decent amount of storage space for the game. The Atari VCS capitalized on these new developments and so did other home computers like Atari 400 and Atari 800.

The only problem was that Atari did not have enough capital to fund production. At the same time, other companies were entering the video game market with cartridge-based home consoles. All this prompted Bushnell to sell the company to Warner on the condition that it would provide the funds for manufacturing the Atari VCS.

The Atari VCS was finally released in October 1977 in the US and in the year 1978 in Europe. The device came with two joysticks and could be operated through a keypad and paddle controllers. The joysticks soon became an icon of gaming and continued to make an appearance until recent years. The VCS was not as successful as expected. Priced at $199, a handsome sum in those days, the game had very few takers. Coupled with the general public’s misunderstanding that the game console only had Pong, the sales dipped alarmingly. Only half of the manufactured stock was sold in the first 2 years of the game’s release.

Bushnell resigned from the company following a verbal tiff with one of Warner’s key employees. The work culture at Atari, Inc. was extremely laid-back and easy-going. Bushnell was known to host hot-tub parties and employee retreats. Drugs and alcohol were regularly consumed and the atmosphere was extremely lax. The Warner management did not approve of this and Bushnell was fired after arguing with an employee at a board meeting.

Atari, Inc. had a new CEO in 1979, named Ray Kassar. Video games suddenly had a revival during this time and Taito’s Space Invaders game was flying off the shelves. Suddenly sales for the Atari VCS picked up and it sold over a million gaming consoles in the year 1979. The next year, twice the amount of consoles were sold. Although the Atari VCS had started off as a damp squib, the sales grew exponentially and suddenly made it the bestseller of the company! Atari, Inc. became so successful that it contributed to about 70% of the total revenue of Warner Entertainment.

During this time Ray Kassar had begun to lay off employees from the R&D and creative departments and replace them with marketing resources. This proved to be a very unsuccessful move. Employees who were the brains behind the games began to quit. Soon a team of four engineers from Atari set up their own gaming company called Activision. They decided to develop better games for the Atari VCS and thus pose a threat to Warner. With that began the age of third-party publishing. Warner was not happy with these developments. They wanted a closed platform and wanted to own the hardware and software required on the Atari VCS. Warner filed numerous lawsuits against Activision but to no effect. Activision games had become too successful to challenge.

Simultaneously, a slew of bad quality games hit the market. This included Atari’s ‘PacMan’ conversion and ‘E.T the videogame’. Atari suffered massive losses in that year. In the arena of home computing, Atari had not been able to churn out anything substantially different after the Atari 2600. Atari’s sub-divisions which produced home computers, games and gaming consoles were independent of each other and there was no communication or collaboration between them. At the same time, other companies were continuing to innovate and released better models of home and personal computers. The result was that the Atari models looked appallingly outdated next to its competitor models. The final nail in the coffin was the NES which was released in 1985. Atari was supposed to partner with Nintendo, but some differences over licence terms led to their break-up. Atari also refused to team up with Steve Job’s Apple which was an upcoming company in those days.

Despite these setbacks the home-console division of Atari continued to make video games. Atari produced highly successful classics like Lunar Lander, Asteroids, Battlezone, Missile Command, Warlords, Centipede, Star Wars and Tempest. For a while Atari managed to stay afloat even when pitched against major competitors like Nintendo, Sega, Taito and Konami. However the age of arcade was coming to an end and the popularity of arcade games plummeted. Youngsters preferred gaming on their own home TVs instead of arcade game rooms.

The basic problem was that Warner was ultimately a records company and did not know how to run a technology-driven company. They did not want to release new products; instead they focussed on increasing marketing effort to sell the products they already owned. Bushnell has been quoted saying – “I would have liked to have taken Atari to another level. If I could go back in time I would not sell to Warner”. Warner was a safe player and was averse to taking risks. When Atari developers developed a novel holographic console called Cosmos, Warner did not want to release it. Even though Al Alcorn had himself worked on the console and in spite of the development effort, advertisement cost and 8000 pre-orders, the company did not release Cosmos.

The home-computing division of Atari was bought by Jack Tramiel, the founder of the Commodore, in 1984 and was renamed Atari Corporation. Warner sold the arcade division – Atari games to Namco in 1985. The Atari divisions sadly separated ways. The original employees of the company had already sought newer pastures and the spirit of Atari was broken.

However Atari corporation continued its operation, albeit as a shadow of its former existence. Atari’s newest offering – its 8-bit computers were fairly successful. However it wasn’t able to hold its own against the new models brought into the market by its competitors. Ironically, most of these companies were owned by ex-employees of Atari. This included Steve Jobs who had once developed the game Break-out for Atari and Jay Milner who had developed Atari VCS microchips. Apple and Atari, their respective companies were now Atari’s competitors.

Atari Corporation’s latest model, the Atari 520 ST was the cheapest 16-bit computer. It had a floppy disk and a cartridge for gaming. Although the Amiga was better, the Atari 520 ST was by far the cheaper. It had a decent life and was especially popular with musicians. A newer version of the model Atari Mega ST was introduced in 1990.In the 1990s gaming consoles began to make a comeback and Sega’s Master System and NES gained popularity. The home computer market was getting monopolized by Microsoft.

The Atari corporation launched its last computer – a 32-bit model named Falcon, and owing to the steady decline in business , shut down the computer division. They then focussed all efforts on building a console. Initially they purchased a console developed by a company called Epyx and named it Atari Lynx. It was launched along with Nintendo’s Game Boy and although the handheld console was a full colour device with better quality than the Game Boy it was far more expensive. Coupled with its low battery life, and limited software, the Lynx lost the battle to the Game Boy. After Sega launched its new colour console Game Gear, Lynx vanished without a trace.

Atari’s Jaguar was the final nail in its coffin. It was the first 64-bit console and had an extremely powerful processor. The body was red and black. The console did not gain popularity due to its inefficient controller and limited software support. The Jaguar did have a few bestselling games like Tempest and Alien vs Predator, but with a total of only 67 games the Jaguar failed miserably. Finally Tamriel dissolved the company in 1996. A disk-drive manufacturer – JTS purchased the name and assets.

After two years, JTS was purchased by Hasbro Interactive, with the sole purpose of acquiring the rights to the Atari name. Hasbro Interactive, which was the video game subsidiary of Hasbro, further sold off the company to a French company named Infogrames in the year 2000. Infogrames had begun an aggressive campaign of acquiring all major video game companies in a bid to destabilize the monopoly of EA Games. On acquiring the Atari brand name, the company rebranded itself and released a number of games like 2003’s Driver 3, 2009’s Ghostbusters: The Video Game and 2008’s Alone in the Dark. Thus Atari made a comeback through Infogrames. Atari’s early games were re-launched by Infogrames through different platforms. Games like Centipede, Tempest, and Pong were revamped and published. However they failed to make a mark. Atari had lost its dominion on the video game industry, never to regain it.

Atari again went bankrupt and stopped operation in 2013. As of now it hasn’t been purchased by any company. Nolan Bushnell laments the sale of Atari to Warner and has conjectured that Atari would have been a competitor to Xbox and PlayStation . Atari had begun to deteriorate ever since the first sale to Warner. Even though Atari was by no means the inventor of the video game, they were the ones who made the video game business commercially viable. Atari paved the way for the video games of the future.


1972
1984
Sunnyvale, CA

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