The Ultimate History of Video Games: From Pong to Pokémon and Beyond—The Story Behind the Craze That Touched Our Lives and Changed the World (38 page)
Authors: Steven Kent
Atari was poised for another great year when Ross approached Spielberg about licensing
E.T.
The
Pac-Man
cartridge had been a disappointment, but Kassar and Gerard still claimed that Atari’s sales would be up by 50 percent for the fourth quarter. Ross might not have known the full extent of the
Pac-Man
debacle and had felt confident that a game based on
E.T.
could be a huge bestseller.
Ross told Spielberg that the game should be out in time for Christmas. Since they made the deal in late July, that left very little time to design and manufacture it.
I asked Steve, “When do we have to produce this?”
He said for Christmas of 1982.
This was in July when he called me, the end of July.
I said, “Steve, the lead time to produce a game is at least 6 months between semiconductor deliveries and programming and all that. It’s impossible.”
He said, “Well, you have to do it because I promised Spielberg we’d have it on retail shelves for Christmas.”
We had literally six weeks to produce a brand new game, manufacture it, package it, and market it. It was a disaster. I mean, the programmers hated it. Nobody liked the game.
Then he [Ross] ordered us to produce almost five million of these games. I told him, “Steve, that’s crazy. We never make five million of a product until we have some market testing.”
He said, “Well, it’s going to be a big hit because of Spielberg and
E.T.
” So we made five million and practically all of them came back.—Ray Kassar
None of the VCS programmers wanted anything to do with
E.T.
because it came with an unrealistic deadline and high expectations. In the end, Kassar turned to Howard Scott Warshaw, a young programmer whose other games,
Yar’s Revenge
and
Raiders of the Lost Ark
, were both million-sellers.
*
Kassar was so anxious about this project that he forgot his normally aristocratic pretensions and called Warshaw himself.
It was late July when they first called me up to do it, after my boss, other programmers, and everybody else told them to forget it. Ray called me up personally. Because of some other interactions I had had with Ray before, I think he just had a feeling that I would do it.
So he called me up from Monterey and said, “Howard, we need
E.T.
” This was like July 23, and he said “We need
E.T.
by September 1. Can you do it?”I said, “Yeah, provided we reach the right agreement.”
—Howard Scott Warshaw, former VCS programmer, creator of Atari’s
E.T.
E.T.
became infamous throughout the video-game industry for its dull play and disappointing story. The game involved leading Spielberg’s cute
extraterrestrial away from various dangers as he tried to assemble an intergalactic device to phone home. The game’s graphics were primitive, even by Atari 2600 standards, and E.T. spent most of the game falling into holes.
Riding on the heels of the
Pac-Man
disaster,
E.T.
was too much. Atari had managed to sell millions of
Pac-Man
cartridges, but the majority of
E.T.
cartridges remained in dead inventory. Atari tried to buy its way out of the hole by licensing top arcade games, often spending millions of dollars for exclusive rights.
Basically, we’d zap them. They had last right of refusal, so we’d just come up with a bid that was wild; then, of course, Atari would be forced to beat it.
Atari was getting it from two sides. Atari was getting it from not only the glut of the market, but also they were paying unbelievable amounts of money for these software titles. You know, the bidding on these software titles was just mind blowing.
—Al Kahn, former executive vice president, Coleco
Not even home versions of the latest arcade hits helped. Consumers had already begun losing interest in video arcades, and in 1983, they stopped purchasing video games. The industry that had shown such miraculous growth through most of 1982 suddenly became a black hole.
Warner Communication’s Atari, which pioneered home video games with such classics as
Space Invaders
and
Asteroids
, has lost $356 million so far this year, dropped 3,000 employees from its payroll of 10,000 and finished moving all of its manufacturing facilities to Hong Kong and Taiwan. Plagued partly by sluggish sales of Intellivision games, the electronics division of Mattel has run a $201 million deficit in 1983, while laying off 37 percent of its 1,800-member work force. Activision estimated that it lost $3 million to $5 million in the past three months, despite scoring hits with its new
Enduro
and
Robot Tank
games. At Bally, the leading manufacturer of arcade video machines, profits are off 85 percent.
8I think I’m responsible for some of the problem. I think Ray is responsible for a lot of the problem. Neither one of us is responsible for the fact that a market just went away in an eye blink.
Steve Ross blamed me to some extent. He blamed Kassar. The truth of the matter is, you can’t blame me for the market imploding, but you can certainly pin some of the blame for the Atari problems on me and I in turn will tell you that you have to blame Kassar for some good chunk. He was running the show. It was on his watch and tangentially on my watch.
—Manny Gerard, former vice president, Warner Communications
Atari was stuck with enormous inventories of worthless game cartridges. With no hope of selling them, Atari dumped millions of cartridges in a landfill in the New Mexico desert. When reports came out that people had discovered the landfill, Atari sent steamrollers to crush the cartridges, then poured cement over the rubble.
*
By the end of 1983, Atari had racked up $536 million in losses. Warner Communications sold the company the following year.
*
Rick Tighe, a techie, suggested sticking the pinball knocker in the cabinet. It went off when Coily fell off the cubes, making a loud “thwack.”
*
Because Coleco owned the rights to
Dragon’s Lair
, RDI was unable to offer the games as one of the titles for its new system.
*
According to Neiman, one reason Vectrex remained active in European markets after disappearing in the United States was that most European homes had only one television.
**
One of the most popular Vectrex games was an excellent translation of
Star Castle.
*
Warshaw’s first game,
Yar’s Revenge
, was the bestselling original game Atari released for the VCS. It was about Yar of the Rassak Solar System. The joke was that Yar was Ray spelled backward and Rassak was Kassar. The game was Ray’s revenge on Activision.
Warshaw told a friend in the marketing department that the name was a secret joke between him and Kassar and that Kassar loved it, even though Kassar had never heard about it. He asked his friend not to tell anyone, because he didn’t want anything to influence getting the name approved. The friend immediately made sure the name stuck. Warshaw’s next game was
Raiders of the Lost Ark.
*
This was not the first time Atari destroyed unwanted cartridges. The practice had gone on for years. According to several sources, the concrete slab under Atari’s Borregas Street warehouse is filled with crushed cartridges.
The AftermathI went to visit Nolan at this small toy company he owned called Axlon. I walked in and asked to see him and was told, “Mr. Bushnell’s in a meeting.”
About three minutes later a door bursts open and Nolan comes through with a big smile on his face. He says, “Manny Gerard, the man who fired me from Atari.”
I said, “Right, Nolan. And the guy who made you a millionaire.”
Nolan stopped in his tracks and said, “I guess you’re right.”
—Manny Gerard, former vice president, Warner Communications
“My name is Nolan Bushnell, but I’m not God,” he told them. “I need to build factories.”
If not God, then Prometheus—about to be unbound. At midnight on September 30, 1983, a seven-year noncompete agreement, which Bushnell had signed when he sold his pioneering Atari Inc. video game company to Warner Communications Inc. in 1976, was due to expire, and a grand party had been organized to celebrate his release.
—Steve Coll, “When the Magic Goes,”
Inc. Magazine
With the unlikely and unqualified successes of Atari and Chuck E. Cheese, Nolan Bushnell became a Silicon Valley legend and a world-renowned high roller. He purchased two personal jets, bought mansions, took up yachting, and developed a taste for the finer things in life. When he decided that Northern California needed a truly fine restaurant, he had one built—the Lion and Compass.
Bushnell mingled with the biggest names of his time, entertaining actors and politicians and doing frequent interviews with financial publications. He even considered making a bid for a seat in the United States House of Representatives.
I met Nolan in the late 1970s. I was a reporter at the
Washington Post.
My recollection is that I met Nolan at a party at Bob Woodward’s house. Bob was his next-door neighbor in Washington.Nolan used to own a Learjet and he loaned it to George Bush when Bush was Ronald Reagan’s vice presidential running mate, and he sort of got interested in politics that way. And he got put on some Presidential commission as a result of what he did.
—Tom Zito, former reporter, the
Washington Post
In 1981, Bushnell founded Catalyst Technologies, an incubator firm that housed and funded several high-tech start-up companies. In exchange for building space, access to office equipment, and funding, Bushnell received a piece of each company.
The companies he selected reflected his tastes. Through Catalyst, Bushnell became involved with companies working on high-resolution television monitors, cable television, and robotic toys. For him, the Catalyst building was a kind of dream factory that was funded by the ever-growing success of Chuck E. Cheese and Pizza Time Theaters.
In the three years since Bushnell had started Pizza Time Theaters, the company had opened 204 restaurants, and he expected that number to grow to 277 by the end of 1983. Behind the scenes, however, Bushnell’s empire faced a previously unforeseen danger in the form of a new restaurant chain that would challenge Chuck E. Cheese. The chain, ShowBiz Pizza, was nearly identical to Chuck E. Cheese.
Like Chuck E. Cheese, ShowBiz restaurants served pizza in a cafeteria-like theater, in which customers watched musical reviews performed by robotic animals. Chuck E. Cheese had a streetwise rat, ShowBiz had a bear named Billy Bob leading a band called the Rock-a-Fire Explosion. Both chains featured large arcades in which patrons played video games and children rode coin-operated rides while waiting for their orders.
The similarity was no accident. ShowBiz Pizza was founded by Robert Brock of the Brock Hotel Group—the largest Holiday Inn franchise in America at the time.
1
Brock first became aware of Pizza Time Theaters in 1978, shortly after Bushnell opened his second location in San Jose. He contacted Bushnell the following year and inquired about opening a chain of 200 Chuck E. Cheese restaurants in the Midwest.
Brock decided against licensing Chuck E. Cheese, however, when he met Aaron Fletcher, an inventor manufacturing robotic characters similar to the ones in Chuck E. Cheese that looked better and cost less. Instead of buying Bushnell’s franchise, he decided to compete against it.
Two weeks after returning to [his corporate headquarters in] Topeka, Brock no longer wanted to be a franchisee; he wanted to be a franchiser. Brock demanded that Nolan tear up the contract. Nolan refused. Brock went ahead anyway and negotiated a contract with Fletcher. Nolan sued Brock for breach of contract, and Brock countersued Nolan for misrepresentation.
2
Bushnell successfully demonstrated that Chuck E. Cheese had been a unique idea and that ShowBiz was an imitation, and the courts ruled in his favor. Although he was not successful at shutting Brock’s chain down, Bushnell received a percentage of the annual revenues from the first 160 ShowBiz restaurants.
3