The single most important company in the history of the video game industry might be Atari. Founded in 1972 and famous for developing arcade games like Pong and Asteroids as well as home consoles like Atari 2600, Atari was seen as the king of video games back in the seventies and eighties and they helped usher in the video game industry’s golden age when video games first started gaining mainstream popularity.
It began with a man named Nolan Bushnell. Born in Clearfield, Utah in 1943 to a middle-class Mormon family, Nolan Bushnell studied engineering and later business at Utah State University before transferring in 1964 to the University of Utah in Salt Lake City where he graduated with a bachelor’s degree in electrical engineering. Being a computer science student in the 1960s, Bushnell was among the first generation to play video games, like space combat game Spacewar! (1962) created by Steve Russell at MIT and highly popular with college students across the country.
One of Bushnell’s earliest jobs while at college was an amusement park operator, later promoted to manager of the games department where he became familiar with electronic arcade games, the customers who played them and the video game industry in its earliest period.
By the end of the sixties, Bushnell graduated from U of U and moved to California in hopes of working at Disneyland, but instead he was hired by electronics company Ampex, where he met future business partner Ted Dabney who shared similar interests.
Their first collaboration was a Spacewar! clone called Computer Space, which they licensed to arcade manufacturer Nutting Associates in 1971, but that game was a commercial failure. Computer Space required reading instructions to understand how to play, but Bushnell thought a more simple game would be more popular.
In 1972, Bushnell and Dabney founded Atari, Inc. in Sunnyvale, California, the Japanese word “atari” being a reference to a check-like position in Bushnell’s favorite board game the Chinese strategy game Go.
A San Francisco engineer and UC Berkeley student named Al Alcorn was one of the first employees hired at Atari and Bushnell tasked him with programming a game similar to the table tennis game on Ralph Baer’s Magnavox Odyssey home game console as a test project. Alcorn not only copied the game but he improved it in small technical ways, and that game would end up being Pong. While the game was originally a test, Alcorn had developed a two-player game that was so fun, Bushnell and Dabney believed they had a hit on their hands.
The first Pong machine, made out of a black & white television set, a laundromat coin mechanism on the side and a milk carton on the inside to catch coins, was placed in a local Sunnyvale tavern called Andy Capp’s for a test run in 1972. Bushnell’s goal was to make a game so simple that even a drunk could play it, and that goal was met because the test run was extremely successful, leading to further distribution in more bars, each machine averaging around $400 a week. Pong went on to become the first mainstream video game hit and by 1974, 8,000 Pong cabinets were made, which was still not enough to meet demand.
In the years following Pong, Bushnell and Dabney had a falling out, with Dabney feeling Bushnell was pushing him to the side and Bushnell feeling Dabney was holding him back, so Dabney left Atari in 1973 and eventually the video game industry altogether.
In 1974, Atari began facing financial struggles due to their failure to meet the demand for the popularity of Pong and extra competition from various Pong clones made by other game companies. However, in a clever turn of events, one of the ways in which Nolan Bushnell saved Atari was by co-founding Atari subsidiary Kee Games with his friend and neighbor Joe Keenan as a way of making games outside of Atari’s exclusivity deals with the arcade distributors. Kee Games’ 1974 maze game Tank was actually a major success and brought financial stability back to Atari in the mid-1970s and helped them avoid bankruptcy, as did Atari’s Pong home console which was released the same year and allowed gamers to enjoy Pong from the comfort of their own home without wasting quarters, a successful venture which helped inspire more game companies to enter the home console market.
Atari went on to have many other video game hits in the arcade, including Steve Wozniak’s Breakout (1976) which was basically a single-player version of Pong, the endlessly fun and challenging Asteroids (1979) and the games Lunar Lander (1979), Missle Command (1980), Battlezone (1980), Warlords (1980), Centipede (1981), Tempest (1981), Gravitar (1982) and Crystal Castles (1983).
Atari later calculated they would have far more success with a home console that could play multiple games besides Pong, thus production on a new console called the Atari Video Computer System (VCS) began in the late 1970s.
To get funding for the development of the VCS, Bushnell made the decision to sell Atari to Warner Communications (the company that is today known as WarnerMedia) for $28 million, although Bushnell stayed on as CEO and chairman and Joe Keenan remained president. Warner hoped the success of the video game industry could help compensate for their lack of success in the film and music industry that decade.
The Atari VCS was released in September 1977 and featured many ports of their arcade hits, although ports of arcade games licensed from other companies like Space Invaders (Taito) and Pac-Man (Namco) were the most financially successful games on the VCS. Although Atari still made original VCS games that were successful like Combat (1977), Adventure (1980), Yars’ Revenge (1982) and Solaris (1986).
Another venture Nolan Bushnell made was Chuck E. Cheese, founded in San Jose, California as the Pizza Time Theatre. Chuck E. Cheese, which was owned by Atari, helped the video game company bypass distribution problems, and we all know how successful Chuck E. Cheese is as a family entertainment center and restaurant chain. Atari owned the chain from 1977 to 1980 so this was another great source of finance along with the VCS, but Atari’s success was eventually unsustainable, and the company’s downfall would come as early as the 1980s.
The VCS would dip in sales by the end of the ’70s and Atari had produced so many by that point that they were in danger of financial loss, that is until they licensed Taito’s Space Invaders and ported it to the VCS in 1980. That game was a huge seller for Atari and the company would also license and port Namco’s hit arcade game Pac-Man to the VCS as well, which was seemingly a no-brainer and a guaranteed money maker, but when it was released in 1982 it was critically panned for being inferior in quality to the arcade version. This damaged Atari’s reputation and the reputation of arcade ports in general, and even though it was the best-selling VCS game, it made customers a lot less willing to trust Atari.
Further contributing to their downfall, Atari released a follow-up to the VCS called the Atari 5200 in 1982. It was not as successful and its development would be discontinued in 1984, although its existence eventually led to the Atari VCS getting its more popular nickname the Atari 2600.
Atari also ventured into pinball machines, 8-bit home computers like the Atari 400 and Atari 800 (both released in 1979), with first-person space combat game Star Raiders those computers’ biggest success, and software development with Atarisoft (1983), which allowed Atari to make money off creating games for their competitors, but that competition was part of the problem. The video game market was becoming oversaturated.
In the 1980s, Atari began facing competition from game consoles like Commodore 64, ColecoVision and Intellivision, and third-party game developers like Activision had also made games that rivalled the work of first-party developers like Atari. By 1983, the video game industry crashed and Atari took a huge financial hit. Not just because of the failure of the 5200 and growing competition but because of lackluster software, most noticeably the video games capitalizing on the success of movies like Raiders of the Lost Ark and E.T. the Extra-Terrestrial, the latter famously described as the worst video game of all time, further emphasized by the quality of Spielberg’s film on which it was based.
Atari also had a bad reputation for being poorly run and unprofessional, which even as a consumer was pretty clear based on their products. Atari, once the most popular video game developer, would eventually be eclipsed by Japanese game developer Nintendo.
In 1984, when the industry was seemingly at its lowest point since Pong came out, Warner sold the consumer products division of Atari, Inc., which handled all hardware and software development, to former Commodore CEO Jack Tramiel. An event which would split Atari into two companies, a company owned by Tramiel called Atari Corporation, and a company owned by Warner called Atari Games, which means the rest of Atari’s history essentially goes down two different roads.
Under Jack Tramiel, Atari Corporation owned the rights to all of Atari’s previous games and they released hardware to capitalize on the popularity of their IPs like the Atari 2600 Jr., the Atari 7800, the Atari ST personal computer, the Atari Portfolio (which was the first palmtop computer), the handheld Atari Lynx and the 32-bit home console Atari Jaguar, which competed with the 16-bit Super NES and Sega Genesis in 1993 but failed to stand out due to lack of compelling software. None of Atari Corporation’s products were very successful so in 1996 the company merged with hard disk drive maker JTS Inc. JTS later sold the Atari name to Hasbro Interactive in 1998, with Hasbro owning the brand and IP rights to the Atari, Inc. library, but in 2001, Hasbro decided to sell Hasbro Interactive to Infogrames, which officially changed its own name to Atari in 2009 as a way of simplifying the brand. This company exists today as Atari SA and is primarily a holding company for all of Atari’s classic games like Pong, Asteroids and Tempest as well as Hasbro Interactive’s Rollercoaster Tycoon series and the entire Infogrames and Ocean Software library.
After Warner Communications sold off their classic library of Atari games to Tramiel, they retained their team of game developers to create all new games, one of the company’s earliest successes being the arcade game Marble Madness (1984) designed by Mark Cerny. However in 1985 Warner decided to sell Atari Games to Pac-Man developer Namco, until Namco eventually also lost interest in Atari Games and sold its shares in 1987. Warner, which merged with Time Inc. in 1989 and was then known as Time Warner, eventually bought back Atari Games in 1993 and made it into a subsidiary of Time Warner Interactive, until 1996 when Time Warner once again sold it to WMS Industries (the owner of Mortal Kombat developer Midway Games) who changed the name of Atari to Midway to avoid confusion with Hasbro’s Atari Interactive. This meant that Midway now owned the aforementioned Marble Madness as well as games like Paperboy (1985), Gauntlet (1985), RoadBlasters (1987), Hard Drivin’ (1989), Klax (1990), Rampart (1990) and the popular monster fighting game Primal Rage (1994). This would only last until 2009 when Midway filed for bankruptcy and its assets were once again sold to…wait for it…Time Warner under Warner Bros. Interactive Entertainment. With Midway finally dissolving in 2013, this meant that Warner now owned the rights to games like Mortal Kombat, which allowed them to found NetherRealm Studios and continue making movies based on the game series like the one that recently came out on HBO Max.
As you can tell after reading this, Atari still exists but in very different forms from what it used to be. The original company paved the way for others to surpass them but they lacked the creativity to survive in an environment that they helped propagate. Part of the problem with Atari was that it became so successful that it felt more corporate driven than artist driven, especially since it was owned by Hollywood giant WarnerMedia. This eventually led to an exodus of Atari game developers following Nolan Bushnell’s departure and Warner’s growing dominance, which in part led to the development of the first third-party game developers. That would ultimately end up being a good thing for the industry since Atari had a monopolistic grip on the game industry for many years. The beginning of Atari’s fall was the beginning of the rise for many of the best video game developers in the industry, such as Nintendo, Sega, Capcom, Konami and Square Enix.