From the ‘crack’ of 1983 to $180.3 billion in 2021: Here’s how video games managed to be a millionaire industry
It is not entirely clear to whom this should be attributed. the authorship of the first video game. In the home stretch of the 1940s, American physicists Thomas T. Goldsmith and Estle Ray Mann designed a peculiar entertainment device that mimicked a radar screen like those used during World War II (which had ended a few years earlier). ) on the screen of an oscilloscope connected to a cathode ray tube.
A little later, in 1950, Canadian engineer Josef Kates created “Bertie the Brain”, a gigantic computer that used vacuum tubes and was able to run the game of three in a row. Kates designed and built this computer with the intention of showing the thermionic valves he had designed, which were significantly more compact than conventional vacuum tubes, at the Canadian National Exhibition that year.
What is much clearer is that we owe the authorship of the first commercial video game console to Ralph Baer. This American electronics engineer of German origin led the team that created Odyssey, the console that the Magnavox company put on the market in 1972 for 100 dollars, a cost well above the 20 dollars that Baer initially wanted to sell. The video game industry had just been born.
From the rise of video games to the crash of 1983
Nolan Bushnell, an electronics engineer from northern California, had been toying with the idea of designing an electronic game that could connect to televisions for several years. When Bushnell saw the Magnavox Odyssey console in operation in 1972, his doubts were finally dispelled, so on June 27 of the same year founded Atari alongside Ted Dabney. Each of them contributed $250 when the company was founded, and only ten years later Atari had annual sales of $2 billion.
In just a decade, the video game industry had managed to achieve a volume of business that Bushnell and Dabney had not even dreamed of ten years before. Atari monopolized a large part of this cake with its 2600 and 5200 consoles, but it was by no means the only company to successfully bring successful rigs to market. Odyssey from Magnavox, ColecoVision and Gemini from Coleco, Intellivision from Mattel or Arcadia 2001 from Emerson are some of the proposals that have competed for this market.
However, by the end of 1982, the American video game industry started to show some stress. The market was saturated with an endless supply of consoles that barely added value to the machines that Magnavox and Atari had brought to store a few years earlier. They simply limited themselves to recycling a hit formula ad nauseam for the sole purpose of getting a piece of the juicy pie that the video game market had become.
At the beginning of the 1980s, the effort to innovate, to propose new ideas, which had driven this industry during the second half of the 1970s, seemed to have disappeared.
The software situation was even more alarming. Games were everywhere, but the feeling that they were fueled by a few constantly recycled ideas was even more pervasive than in the hardware realm. At the beginning of the 1980s, the effort to innovate, to propose new ideas, which had driven this industry during the second half of the 1970s, seemed to have disappeared. Quality took precedence over. The only thing that mattered was to sell more. And charge more.
This short-term strategy failed miserably. Users realized that video game companies were always selling them the same thing. They kept coming back to the same ideas and their playful potential was exhausted. The loss of confidence was total, and, as expected, the market suffered sharply and dramatically. Moreover, at that time the relevance of video game press was anecdotal, so fans were forced to buy blindly.
When companies in this sector realized that they had no choice but to act and to change direction, it was too late. Atari, which by its numbers was still the engine of this industry, tried to play it safe by launching the adaptation of the film ‘ET, the extraterrestrial’ and the conversion of ‘Pac-Man’, which swept the arcades, for its 2600 console But none of these games lived up to what was expected of them.
Both were developed in haste, without means and with the sole intention of arriving in time to revitalize a market that was on the verge of collapse. Its quality was absolutely poor, especially that of the video game inspired by Steven Spielberg’s film, and users reacted as expected: turned his back on them. Atari only sold 1.5 of the 5 million copies of “ET” it had made, so it was quick and lazy to dispose of unsold units by burying them in the New Mexico desert.
In any case, the video game industry crash of 1983 should not be attributed exclusively to the bad conversion of “ET”. It was just the straw that broke the camel’s back. The rise of personal computers contributed to the console debacle, but the rift certainly caused, as we have seen, loss of trust users due to the poor quality of video games and the saturation of a market that had left behind most of its leitmotif: its playful potential.
Economic reports from the time show that in 1983 the American video game industry had a turnover of $100 million. Only one year before this market reaches a turnover of 3 billion dollars, the accident was monumental. Many companies had to close, and even Atari was up to its neck in water. In fact, its debts meant that in 1984 it ended up in the hands of Jack Tramiel, the founder and former co-owner of Commodore who, a few months after leaving the company he had created, decided to buy the consumer division of Atari from Warner.
Japan gave the video game industry the boost it needed to resurface
By the early 1980s, the European video game industry was no more than a smaller-scale reflection of the American industry. However, in Japan, which was the other major market, the landscape was very different. Years before, Nintendo had entered the electronic toy industry at the hands of the great engineer Gunpei Yokoi. His light guns and his first video game console, the Color TV Game, released in stores in 1977, had done very well.
In 1983, just at the time of the cataclysm which swept over the American industry, Nintendo released its second video game console: the Famicom.
Moreover, the Game & Watch had filled the coffers of the company, so it was ready to take the next step and consolidate itself as the dominator of the Japanese video game market. In 1983, in the midst of a cataclysm sweeping across the American industry, Nintendo released its second video game console: the famicom (later known in Europe and the United States as the Nintendo Entertainment System or NES).
This machine was welcomed with open arms by the Japanese market, which at the time was very different from the American market. The latter was dominated by a hodgepodge of companies fighting among themselves to get a piece of the pie, and for which, moreover, the quality of their video games had taken second place. However, in Japan, Nintendo had no rival. But far from settling, it was releasing high-quality video games for arcades and its home platform.
Shigeru Miyamoto had already achieved monumental success with his “Donkey Kong” and its sequels, video games that already featured one of the icons of this industry for decades: Mario. Everything was fine, so there was no reason to settle for the Japanese market. Initially, Nintendo intended to land in the American market with Atari, but a clash derived precisely from the intellectual property of “Donkey Kong” led it to finally decide to enter this market on its own.
The North American industry began to recover and in 1988, with Nintendo monopolizing 70% of the market, it billed $2.3 billion.
The NES console landed in North America in October 1985, and just a year later, in September 1986, it also arrived in European stores. Many American analysts clung to the 1983 crisis to predict that Nintendo would take a monumental hit, but it didn’t. The NES arrived armed with a generous amount of good quality video games, and managed to mark a turning point. The North American industry began to recover and in 1988, with Nintendo representing 70% of the market, it achieved a turnover of 2.3 billion dollars.
The size and relevance of the video game industry today is not just down to Nintendo. A lot more has happened since the mid-1980s, and many other companies have been involved, that have helped position this market where it is today, but there’s no doubt that Nintendo has proven that things could be done right.
This quality mattered. That it was necessary to offer added value to consumers. New experiences. In short, he showed that the path followed by Atari, Coleco, Mattel and the other North American companies was not the right one. In 2021, the global video game industry billed in total $180.3 billion and enjoys a health that many other markets would wish for themselves.
Pictures | cottonbro | Tomasz Filipek | Jessica LewisCreative