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 (40 page)

Tramiel was never indicted, and C. Powell Morgan died before the commission investigating the Atlantic Acceptance collapse concluded its work. He later moved his headquarters back to the United States.

Tramiel made up sayings that were bandied about his company. One of his sayings was, “We need to build computers for the masses, not the classes.”
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Making computers for the masses meant finding a way to sell a low-cost, fully functional computer. To do this, Tramiel bullied his engineers to find cheaper ways to manufacture components and stripped costly luxuries from products.

He also saved money through vertical marketing. Owning MOS Technologies provided him with an inexpensive source for computer chips. Years later,
when he wanted to sell dot matrix printers with his computers, Tramiel purchased a printer manufacturer and was able to market printers at stripped-down prices. When Commodore unveiled the Pet Computer in 1977, it was the first home computer to retail for under $1,000.

In 1980, Jack Tramiel survived a mid-flight airplane fire while entertaining two important software developers on his corporate jet, which was jokingly referred to as the Commodore “Petjet.” During the flight, the wiring on a coffeemaker caught on fire while the jet was headed from Chicago to Commodore’s California headquarters.

By skill or by luck, the two men flying the jet managed to keep it together until they reached an airport in Des Moines, Iowa. With the electrical system destroyed, the pilot had to stop manually. The jet skidded past the end of the runway, but all of the passengers were able to walk away from the scene.

Tramiel later told an employee that the near-fatal incident was God telling him “not to fly so high.”
¹³

In 1981, Commodore released a home computer called the VIC-20 that sold for under $300. The VIC-20, which came with 5K of RAM and 16-color graphics, was a pricing coup for its time. Backed by commercials with William Shatner
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as its spokesperson and sold through regular retail outlets instead of computer stores, the low-end machine was a major success. While Atari began faltering in 1982, Commodore sold over 800,000 VIC-20s worldwide.
**

In August 1982, Commodore launched the Commodore 64 (C64), a personal computer that company executives claimed rivaled the $1,000 Apple II
in power but sold for $600. By the following January, Commodore was shipping 25,000 C64 computers per month.
¹⁴
The Commodore 64 went on to become a turning point in the history of home electronics, propelling Commodore into practically unheard of financial success.

The public’s interest in video games seemed to have been replaced by a fascination with home computers. Atari, Mattel, and Coleco now scrambled to find ways to compete.

Though 1982 was a banner year for Coleco, the crash of the video-game market made Coleco CEO Arnold Greenberg nervous. Going into the future, he wanted something more than ColecoVision. Greenberg’s drive took his company in two directions.

Greenberg’s pet project was the Adam Computer, and he abandoned the ColecoVision to manufacture it. Adam was a complete computing solution. It came with a master console that contained an audio cassette–like high speed data recorder and a slot for playing cartridge games, a letter-quality printer, and a 75-key keyboard, all in one box. The complete Adam setup sold for $600, but Coleco also built a partial Adam kit that could be plugged into a ColecoVision, which retailed for $400.

Coleco unveiled the Adam computer in 1982, promising to ship 500,000 units in 1983. Production took longer than expected, however, and less than 100,000 Adams reached store shelves that year.

Coleco also ventured into the toy business.

In 1982, Greenberg heard about a small toy company near Cleveland, Georgia, called Appalachian Artworks. Xavier Roberts, the 28-year-old owner of the company, was a dropout from nearby Truett-McConnell College, where he’d studied sculpting. Before dropping out, Roberts had created a line of pudgy baby dolls that he called “Little People.”

Roberts’s Little People were so popular that he left school and set up a business selling Little People out of an old clinic that he called Babyland General Hospital. Roberts’s dolls were not manufactured at Babyland General, they were “delivered.” Employees dressed like doctors and nurses (i.e., assembly workers) brought them into viewing rooms in beds of cabbage.

Instead of selling his dolls, Roberts put them up for “adoption.” Adoption rates ranged from $125 to $2,000, depending on the doll. The more expensive adoptees came with furs or diamonds. One thing Roberts stressed was that each doll was unique and had its own name and identity. They even came with adoption papers and birth certificates. More than 250,000 people had adopted Roberts’s handmade dolls by the end of 1983.

Greenberg heard about the dolls and decided to introduce Babyland General Hospital to the world of mass production. Coleco licensed Roberts’s concept and renamed the dolls “Cabbage Patch Kids.” Under the direction of Al Kahn, senior vice president of marketing, Coleco manufactured 2.5 million Cabbage Patch dolls in 1983. Kahn and Greenberg had grossly underestimated the appeal of their pudgy little dolls.

Cabbage Patch Kids sold out as quickly as Coleco could ship them. Stores ran out of stock as Christmas rolled around, and shoppers sometimes broke into near-riot frenzies as they tried to grab the dolls wherever they could find them. Even stores that jacked up the price of the dolls from $25 to $50 sold out, and many enterprising scalpers found that they could resell the dolls for over $100. According to Kahn, Coleco hoped to do $1 billion in Cabbage Patch sales in 1984.

The news was not as positive on the electronics side of Coleco’s operations. Committed to meeting his 1983 shipping date, Greenberg pushed the Adam into production before it was ready. More than half of the computers Coleco shipped in 1983 were returned as defective.

Wall Street was not impressed. Over the next year, Coleco’s stock dropped from 22 points per share to 13. Greenberg claimed that his company had fixed the problems when he released his next shipment of Adam computers, but the public wasn’t interested. “It’s almost impossible to resurrect a lemon like that,” one analyst told
Financial World.
¹⁶

By this time, Coleco’s electronics sales were nearly nonexistent. When Atari dropped the price of the 5200 in 1984, Coleco responded by dropping the price of the ColecoVision and giving a Cabbage Patch doll to people who purchased both a console and a game cartridge.

Adam sales were equally dismal. Unable to re-ignite public interest in its computer, Coleco discontinued the Adam in January 1985. Cabbage Patch Kids were still popular at that time, but their popularity peaked that year.

Still hoping to save his company, Greenberg acquired the company that published
Trivial Pursuit
in 1986. He was too late to catch the
Trivial Pursuit
fad. In 1988, Coleco filed for bankruptcy.

It is impossible to piece together the conflicting stories surrounding the collapse of Mattel Electronics. According to former Mattel Electronics vice president Paul Rioux and other former employees, 1983 was a banner year for the Intellivision.
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That October, however,
Time
reported that Mattel had a $201 million deficit and a layoff of over 600 employees.
¹⁸
Asked about rumors that they planned to close the electronics division in 1984, Mattel executives told
Fortune
that they would not.
¹⁹

By the end of the year, Mattel canceled all new hardware projects. The following March, Mattel closed the division down and sold it to Terrence Valeski, Mattel Electronics senior vice president of marketing and sales, for $20 million. Valeski believed that the 3 million people who owned Intellivisions still constituted a viable market. He and his partners renamed their company Intellivision Inc. and later changed it again to INTV, but after 1983, Intellivision was never a major force in the video game industry again.

With the end of his noncompete agreement in sight, Bushnell dropped too many hints about his planned reentry into video games, and Warner Communications filed a lawsuit against him for breach of contract. Warner executives didn’t mind his involvement with the video game industry through Pizza Time Theaters because it was an arcade and a big customer, but Sente Technologies was a direct competitor.

Bushnell held a party to celebrate the end of his noncompete agreement on September 30, 1984. At 12:00 midnight, the moment that the agreement expired, he officially announced his involvement with Sente Technologies. (He even referred to this event as his “Freedom Day party.”) He might also have unveiled his new line of games at that time, but the suit knocked him off schedule. His next “magic” hour, he announced in several trade papers, would be on December 9, 1984.

Bushnell held a larger party to mark the unveiling of the Sente line. He rented game animals from Marine World’s Africa U.S.A. and had them walk around the floor to create atmosphere. At 10:00
A.M.
, the guests gathered around a stage.

There was a large box on stage with an alarm clock on it. When the clock struck 10:08, Bushnell burst out of the box to celebrate his freedom. He then introduced his customers to his new Sente concept—arcade machines that played games stored on cartridges.