In 2013, the video game industry produced $21-billion of revenue in the United States alone. Console producers like Sega, and game designers like Electronic Arts are multi-billion dollar companies. These stunning figures beg the question: Whatever happened to Atari? The company that started it all is now worth little more than a nostalgic brand name value. In Paul Carroll and Chunka Mui’s article Seven Ways to Fail Big, we see a number of parallels to Atari’s downfall.
- · The Synergy Mirage. In 1982, Atari was on the crest of a newfound youth pop culture, which served as its own economic engine. E.T. the Extra-Terrestrial was a cinema megahit. The two combining forces seemed like a guaranteed best seller. However, a number of stalls in negotiations over rights left game designer Howard Warshaw mere weeks to design and engineer the game in time for the Christmas shopping season. The end result was one of the largest, most embarrassing commercial failures in retail history – a disaster which concluded with Atari purchasing landfill space in the New Mexican desert in which to bury more than 700,000 unused cartridges.
- · Stubbornly Staying the Course. In the late 1970s and early 1980s, a crop of young, intelligent engineers began pioneering a new industry in electronic entertainment. At the time, Atari was the pinnacle of this burgeoning market; and in being so, obtained all the talent and could treat their employees however they saw fit. Atari tended to keep their programmers in the background, accepting full credit for their labors. However, in this fertile new industry, startups began popping up in multitudes, and these new companies – like Activision – were able to easily lure Atari’s talent away with considerations such as including designer names in game credits. Atari did not possess a savvy sense to evolve its company culture in a changing environment.
- · Pseduo-Adjacencies. As the advent of personal computers began to gather steam, Atari felt threatened. Instead of staying with their core competencies – honing what they did best and differentiating themselves from PCs – Atari attempted to mimic the functionality of PCs. Atari steered away from its vastly successful 2600 model towards a product with a keyboard and other computer-like inputs. Though a modest success, this veered Atari along a path which led immediately to its disastrously unpopular 5200 console model.
- · Bets on the Wrong Technology. Interestingly, the bets Atari made on the direction of video game technology were pretty accurate. Immediately upon releasing their popular 2600 model, Atari gauged that they had about three years before the technology became obsolete and would need replaced with faster, more powerful machinery. Atari, then, was a pioneer in the high-powered, lightning-fast processors which operate gaming systems today. However, in the early 1980s it was not speed that sold video games. Atari had flooded and then imploded the video game market, and the entire industry seemed a dead issue. It was not until Nintendo arrived with their NES system and a wide catalogue of inventive, artistically-illustrated games that the industry was finally revived and then took off. Atari, while deftly predicting a need for engineering improvement in their systems, put “the cart before the horse” in their growth.
As detailed above, Atari spawned what is now a multi-billion dollar industry, but for the past twenty years have not been around to enjoy the rewards of their ingenuity. In the Carroll and Mui article, we see explained many of the reasons why.