In late 1983, a number of companies who were marketing video game consoles suddenly went bankrupt. The term "shakeout" would be a more accurate description of what happened, but because of its sudden and unexpected nature the term "crash" has stuck (Fact Index, 1997).
The reasons behind the sudden crash was the weak economy, low quality of games and aggressive marketing, particularly with inexpensive home computers such as the Commodore VIC-20, Atari 800XL, Commodore 64, Tandy Color Computer and Texas Instruments TI-99/4A.
The arrival of home computers saw a depletion in the video games market. Up until the early 1980s, personal computers had primarily been sold in specialty computer stores and at a cost of more that $1000. But that decade inexpensive computers were released which provided customers with more memory, more sophisticated games as well as programs which could be used for tasks such as word processing and home accounting.
But, the home computer was not the only reason behind the video game crash. Critics have said the over-exposure of video games may be a reason. Every company in existence had decided they could make money in the video game marketplace. Chuck Wagon dog food had contracted with Spectravideo to produce Chase the Chuck Wagon, to be a promotional premium to make people purchase the dog food. Kool Aid contracted with Mattel's M-Network division to produce Kool Aid Man for both Intellivision and Atari 2600, again offered as a premium. These are just two examples of how non-electronic related companies were trying to get into the act. As a third example, even Quaker Oats had a videogame division (Chance, 1996).
Also, since the sucess of such games as Pong, many other video game manufacturers released almost identical games, with consumers unable to differentiate between them. Awash in third party cartridge, consumers become unable to distinguish the pearls from the dross and head straight for the sale bins, forcing even high-quality games into a viscious cycle of discounting and loss (Herz, 1997:21).
The result was a massive shakeout of the industry. Mattel, Magnavox, and Coleco all abandoned the video game business. Computer sales were also affected, as the Coleco Adam, TI-99/4A, and the line of Timex-Sinclair computers were withdrawn from the U.S. market, along with a number of other smaller players. Atari nearly went bankrupt and was sold off by its parent company Warner Communications (now part of AOL-Time Warner)(Nintendo, 1997).
By 1985, the US video game industry was virtually non-existent. It wasn't until Nintendo released the NES in 1986 that the video game market became resurged. While, Atari has never really recovered, Nintendo went on to be the largest video game manufacturer in history.
Reference List
Chance, G. (1996) The Great Video Game Crash of 1984, retrieved 21 October, 2004, from http:www.videogames.org/html/crash.html
Fact Index (1997) Video Grame Crash of 1983, retrieved 19 October, 2004, from http:www.fact-index.com/v/vi/video_game_crash_of_1983.html
Herz, J. (1997) Joystick Nation: How videogames gobbled our money, won our hearts and rewired our minds, London: Abacus. ISBN 0349107238
Nintendo Land (1997) The Famicom rules the world (1983-1989), retrieved 20 October, 2004, from http:www.nintendoland.com/home2.htm?history/
Kimberley Howard 11:44, 22 Oct 2004 (EST)
Kimberley Howard 09:53, 21 Oct 2004 (EST)
Kimberley Howard 18:25, 9 Sep 2004 (EST)
