The real cause of the 1983 video game crash

[akator]

As many have said many times before, there was no 1 reason for "the crash."

 

As mentioned by others, I didn't know there was a video game crash. I kept playing video games on vastly superior home computers. For me, I was simply watching video game companies fail that couldn't keep up with the times. So what if they died? Businesses succeed and fail all the time. Anyone remember the Flip video camera? Crocs? Palm?

 

I'm with accousticguitar on this one. I lived through that economy as a kid and I watched my parents struggle every day. It was a big deal when we got a new 2600 game. It did not happen often. When the crash was in full effect we could afford new games though, as they were discounted heavily by that point. So the economy certainly effected my experience during that time. No one has mentioned it because many of those who like to analyze what happened during that era weren't actually there and have no frame of reference other than what they read on the internet.

 

Yeah... the recession ending in 82 is revisionist history, I would suggest it wasn't until 86-87 that things had really improved. (We see the same PR and spin stories now about how the "great recession" ended 2 years ago. Right...)

 

Anyone who suggests the economy doesn't affect how and what people purchase (even *gasp* video games) lives in a different dimension than I do.

[SoulBlazer]

I said this in another post, but I'll say it here.

 

I think the reasons for the crash happening were the following, in no order:

 

1) Shovelware -- too bad many games on the market

2) The troubled state of the economy

3) Too many video game console choices -- market couldn't support them all

4) Rise of the home computer market

5) Decline of the arcade industry

6) People were becoming 'bored' with video games, saw it as a fad whose time had ended, etc.

 

I think the 'shovelware' factor and the rise of the computer market were the biggest reasons.

 

For me personal I was a young kid during the crash and had heard it had happened but I wasn't affected that much. I went from my 2600 to a C-128 in 1985 to my NES in 1987 and then the SNES and a PC in 1991. There were always games to play in my household. (And yes, that applies today, at the age of 35, with my XBox 360.)

[jetset]

Yeah, oddly enough the economy is rarely mentioned...we were in dire straits well past 1984 so parents weren't as well off to spend money on videogames. Double digit inflation, interest rates and unemployment surely didn't help. Then again it was pretty bad from 79/80 or so and though it got REALLY bad in 83/84, I wouldn't call that a HUGE cause. Unemployment was high (approaching 11% at one point) until about mid-84 when it stabilized. Then again we're at 9% now and no crash so that tells you a bit about economic factors...

[Master Phruby]

Its funny how all that shovelware for the 2600 is considered rare and we have to collect it.

[Foxsolo2000]

In the UK the crash hit us in 1984. I remember it so well for one week every store had some kind of console, the next the shelves were empty. The Vectrex was the first casualty for I remember it in a well known local store being sold for 30 UK sterling with the games 5 each. The local gaming mags began swapping over to computer reviews and stopped console game reviews pretty rapidly. Several stated that consumers were swapping over to home computers for they were the way forward and until my friend introduced me to the Sega Master system in 1987 I wasn't even aware of the next generation of game consoles. For me I always believed that the crash happened due to the success of home computers which offered more and had far cheaper games

[Torr]

For me I always believed that the crash happened due to the success of home computers which offered more and had far cheaper games

 

Not sure if the crash can be blamed for that, granted I'm jealous you lived in the UK where the SMS prospered, but even in 1993-94 when the Sega CD was big news, supposedly Nintendo had it's own CD addon coming and little known systems like the NeoGeo and 3DO were popping up I was more than happy with my 486/66 that smoked EVERYONES sega or nintendo in terms of GFX and SFX, plus the most I ever paid for game was 20-30 bucks whereas seg/nintendo games were at least $50+.

After the Genny I never bought another console till the Gamecube and it's prolly the last NEW console I'll ever buy (well I did buy a dreamcast cause I was a sega fanboy and they were discounted down to dirt by 2001 so a system and 10 games for like 200 bucks, how could I go wrong?)

[Syntaxerror999]

As David Crane said, the crash was (mainly) caused by amateurs sticking their nose into the industry producing crap which then got sold for cheap thus destroying sales of otherwise profitable quality games.... Also I think people were naturally moving from Atari to the more capable gaming home computers like Commodore 64.

 

I beleve David was quoted to say in 82 no new games (at least for activision) were sold in the Holliday season due to companies going under, there surplus being bought for pennies on the dollar and then sold in stores for $5 a piece.We all have that person in the family that would rather buy their kid 7 crap games at 5 bucks rather than one good one for 35 bucks. With this being true its no wonder the game market crashed. Nintendo was wise to implement the 3rd party licencing requirements. no doubt it saved their hides and changed the industry.

[ntavio]

I went from playing the 2600 to playing the 5200 to playing on the Commodore 64. My reason for the switch was the better graphics and general gameplay.

 

Also it was cool to have a computer and trade copied games, so we saved alot of money on games.

 

Interesting that no one (myself included) actually realized that the videogame crash occurred at the time.

[Foxsolo2000]

For me I always believed that the crash happened due to the success of home computers which offered more and had far cheaper games

 

Not sure if the crash can be blamed for that,

 

Not sure if it was different in the US but in the UK home computers were seen as the way forward. The success of the Commodore 64 and ZX spectrum all but killed off the video game industry and out of all my friends at school I was the only one who kept and stuck by his 2600. I had one other friend who kept his Vectrex but the rest all ditched their 2600's to get computers. Even the mags I subscribed to just switched overnight to computer reviews and the only thing that stopped my parents from getting me a computer was the price back then. I was always led to believe that the home computer revolution played a huge part in the console demise so I was truly surprised in 87 when I discovered the Sega Master system and the fact that consoles were once again the order of the day

Edited November 10, 2011 by Foxsolo2000

[pocketmego]

The crash was such an insane thing. Like I've said in the past, those that had already jumped from consoles to computers didn't even know it had happened and it DID NOT happen in Japan, the UK, and the bulk of Europe. I am now at a point where I don't even think the crash was an actual event in video game history, but instead CONSOLE game history. Arcades didn't shut down (in fact there were some hits at the time of the Crash such as Gauntlet and Paperboy) and computer games were thriving and re-writing how we envisioned video games with longer term games and stuff made for long play at home (all of which was on computers long before Zelda made it big on consoles). I think perhaps the Nintendo generation has altered history for video games in the same way the Apple generation did for the history of Computers (lots of incorrect facts and altered events).

[akator]

The crash was such an insane thing. Like I've said in the past, those that had already jumped from consoles to computers didn't even know it had happened and it DID NOT happen in Japan, the UK, and the bulk of Europe. I am now at a point where I don't even think the crash was an actual event in video game history, but instead CONSOLE game history. Arcades didn't shut down (in fact there were some hits at the time of the Crash such as Gauntlet and Paperboy) and computer games were thriving and re-writing how we envisioned video games with longer term games and stuff made for long play at home (all of which was on computers long before Zelda made it big on consoles). I think perhaps the Nintendo generation has altered history for video games in the same way the Apple generation did for the history of Computers (lots of incorrect facts and altered events).

 

I couldn't agree more. If there was a "Video Game Crash," then there have been so many "crashes" in my lifetime that it's difficult to believe anything is left of civilization at all. It was followed by the Designer Jeans Crash, Cabbage Patch Crash, Home Computer Crash, Laser Tag Crash, Turbo Crash, and Debbie Gibson Crash... and those were just in the 80s.

 

Video games continued to make craploads of money at arcades and on computers. As did jeans, dolls, computers, shoot-your-friends-toys, cars, and teenage pop stars. The transition of one segment of a market to more mature formats is not a crash, and any company that is diversified and properly managed should survive these shifts that happen every few years. For example, netbooks are not the hottest seller in computers anymore, but past "leaders in the netbook market" are still around and profitable because they are properly managed companies. Thankfully no one other than tech-attention-whores are proclaiming a market transition from netbooks means the death of PCs, either.

 

Of course, people in general aren't interested in an event named, "The 1983 Video Game Transition," because that is far less sensational than, "The 1983 Video Game Crash." They would much rather hear about how 2 years later Nintendo saved video gaming from an abyss, and how Apple was a failed company all 12 years that Steve Jobs wasn't running it.

 

People want stories, not the boring truth, and even nerds want myths and heroes.

[pocketmego]

 

Of course, people in general aren't interested in an event named, "The 1983 Video Game Transition," because that is far less sensational than, "The 1983 Video Game Crash." They would much rather hear about how 2 years later Nintendo saved video gaming from an abyss, and how Apple was a failed company all 12 years that Steve Jobs wasn't running it.

 

People want stories, not the boring truth, and even nerds want myths and heroes.

 

You and I are VERY CLEARLY on the same page, Bro!

[R.O.T.S]

I agree with the general cause being too many people appearing on the scene and saturating the market with poor games and i bet some of these people did not last very long either but i agree with Master.P its sort of ironic that now its these lesser known unusual rare 3rd party carts that have some value to collectors.

Edited November 29, 2011 by R.O.T.S

[Retro Rogue]

There seems to be some confusion on industries vs. market as well as what industries are what.

 

First - coin and consumer are separate industries. The video game crash was in relation to the consumer industry. Coin is a completely separate industry and market with its own cycles, and in fact had suffered it's own downward cycle crash during the '81-'83 years. It was actually on an upswing when consumer started it's crash (which is why Warner decided to hang on to Atari's coin division initially). To the assertion that coin was never effected and arcades didn't go away, that's simply incorrect. From '79 to '82 the coin industry (specifically video) experienced explosive growth, specifically in the number of non-traditional operators of coin equipment. Operators (and vendors) are the actual market of coin manufacturers, they're the people who buy the machines. During that time period machines were appearing in gas stations, doctors offices, department stores, you name it. During coin's crash these all but disappeared, and many video coin manufacturers left the business (or were consolidated), and surviving arcades went through a transition period. As later with consumer, you had a period of more Japanese coin manufacturers entering the US market after the coin crash via establishment of US operations.

 

Second - the video game crash was in relation to the US video game consumer industry, not market. It was also a crash, not a "transition". It seems some people here went to try and establish historical context via their position on the consumer end vs. actual industry happenings or comparing it to single product crashes. A product (cabbage patch, a brand of jeans, etc.) is not an industry. Entire swatches of companies closed/exited the industry, (in the case of some game publishers like Activision) made a transition to the computer industry, or went bankrupt. This includes the one company that owned 80 percent of the market, Atari Inc., which of course imploded. When that happens you have a major ripple effect in the industry and it's future viability. This clean out left a very tangible and well tracked void in the US consumer industry. With regards to market vs. industry, the crash period still had a market - there were still sales being generated by stock (though highly discounted) still on the market.

 

Third - with regards to cause, there are a number of reasons presented here all very valid. However, all roads still lead through Atari and Warner Communications. They were warned on the effects of an explosive growth in the industry and market and increased competition as early as '81, and Warner chose to ignore it for the sake of pumping up its earnings and stock value. By the Summer of '82 Atari's warehouses across the US were already jammed full of backstock, and management still decided to sweep it under the rug so as not to effect earnings and projections. They played games with the reports which lead to the less then expected earnings and the start of the crash in December of '82. When a company that represents 80% of the market suddenly reports losses, it sent other company's stocks falling as well and it shock waved through the industry. Starting in January '83 there were layoffs everywhere and smaller companies down the food chain started looking at exit strategies. '83 saw the bulk of these companies that had opened up over the past few years close down, and by '84 of course the major players were exiting as well.

 

Fourth - the myth of Nintendo coming in and reviving the industry in '85 is of course that, a myth. Nintendo did a limited test run in New York (which according to third party sources was not well received), and another test marketing in LA in February of '86. By that June CES, Nintendo, Atari Corp., and Sega (who hadn't released their console yet) were being seen as a sign of a recovering industry and market. After Christmas of '86 the industry and market were considered officially revived, with Nintendo at it's helm.

[akator]

My issue is with the non-specific term "Video Game Crash" when it is applied to a very specific, localized event that most people even living the US didn't realize was happening.

• the failure of the US console industry, followed by
  
• the transition from the dominance of the US console markets by US companies to dominance by non-US companies
  

This particular event was a blip on the radar to consumers and stocks, nothing near "crash" status such as when the "Tech Bubble" and "Housing Bubbles" burst. Each of those was a "crash," as it radically changed everything about those business sectors and affected both consumers and stock markets negatively for years to come.

 

So... call is what it is. It is the "US Console Industry Crash of 1983," partially created by a market adjustment to the "US Console Bubble." However, calling it the "Video Game Crash" is sensationalist since the game industry and markets continued to evolve and thrive without most consumers noticing a thing, both in the US and the world over.

 

This event was nothing near the elevated status it has been given in recent years. I agree that something happened, but it doesn't deserve the status of a "crash" and it most definitely shouldn't be called the "Video Game Crash" because it was too limited in scope and didn't encompass the entire video game industry and video game markets.

[+thegoldenband]

After extensive research, I think I've identified the real culprit...

 

 

(EDIT: Damn media embedding ruining my joke!)

[SoulBlazer]

Excelent post by Retro, there's just one small thing I might quibble about (and again, it's rather small)

 

I've read in several places that for the test run in New York for the NES sold about half the stock, which I wouldn't call a total failue. Also, I've read that they convienced most of the stores to keep selling the system after the test run was done, and that these systems did not include Super Mario Brothers, although I'm not sure if either of these claims are true. If I was trying to break into the video gaming market after a major crash and managed to sell half my stock in the first try (and perhaps without a 'killer game') I'D call it a success.

[bradhig]

I believe Colecovision and Intellivision could have survived the crash if they hadn't made computer addons for their consoles. I remember a lot of arcades closing and some chuck e cheese rip off places closing ,but I don't remember the consoles disappearing off the market.

[Coleco Gemini]

Too many consoles/games/home computing gaming systems on the market...

[Retro Rogue]

Excelent post by Retro, there's just one small thing I might quibble about (and again, it's rather small)

 

I've read in several places that for the test run in New York for the NES sold about half the stock, which I wouldn't call a total failue. Also, I've read that they convienced most of the stores to keep selling the system after the test run was done, and that these systems did not include Super Mario Brothers, although I'm not sure if either of these claims are true. If I was trying to break into the video gaming market after a major crash and managed to sell half my stock in the first try (and perhaps without a 'killer game') I'D call it a success.

 

Understood. As far as sources, it's covered in pretty good detail in Ultimate History and several other related sources (including newspapers). Likewise at the Jan '86 CES where it was being shown off (as well as the Atari 7800) where retailers were reporting it as a failure. Atari63 here was actually one of the NY retailers, and he's posted about his experience here.

 

Selling half the expected product in the busiest shopping season of the year is not really considered a success. And keep in mind, while the industry had crashed, there was still plenty of product on the market - 2600's and Colecovisions, etc. were still actively being sold, and in fact Atari Corp. had even introduced the 2600Jr that christmas and had great sales at the new price point ($50). Arawaka and the gang in the US saw it as yet another failure (like the previous AVS format or the focus group testing they did over the summer) and wanted to stop, Yamauchi insisted on moving forward hence the more successful Los Angeles test market in February and onward from there.

 

As far as convincing the store to keep selling, that's more of a testament to the sales model than the strength of the console - when you're not making the stores commit to any stock and doing it essentially on consignment including offering to take back anything not sold, it can become very attractive for a retailer to keep a bit of extra floor space free at no real loss and only potential gain.

[SoulBlazer]

Thanks for the extra info...I was indeed thinking both Ultimate History and Phoenix when talking about the test run.

 

Do you know what was included in these NY and LA test run systems? Did they have SMB?

[Retro Rogue]

Thanks for the extra info...I was indeed thinking both Ultimate History and Phoenix when talking about the test run.

 

Do you know what was included in these NY and LA test run systems? Did they have SMB?

 

SMB came in late to the New York test run (some time in late November/early December) and was available at the LA one. It was not packed in at either of the launches, but I believe they started bundling it (i.e. selling it with vs. packing in ) at the LA one.

[Retro Rogue]

Just wanted to announce in this thread, because it's somewhat related - it looks like Curt and I will be coming out with the first book (Atari Inc. 1972-1984) in 2012 for the Atari brand's 40th anniversary.

[pocketmego]

My issue is with the non-specific term "Video Game Crash" when it is applied to a very specific, localized event that most people even living the US didn't realize was happening.

• the failure of the US console industry, followed by
  
• the transition from the dominance of the US console markets by US companies to dominance by non-US companies
  

So... call is what it is. It is the "US Console Industry Crash of 1983," partially created by a market adjustment to the "US Console Bubble." However, calling it the "Video Game Crash" is sensationalist since the game industry and markets continued to evolve and thrive without most consumers noticing a thing, both in the US and the world over.

 

 

 

BINGO!

[jaybird3rd]

Just wanted to announce in this thread, because it's somewhat related - it looks like Curt and I will be coming out with the first book (Atari Inc. 1972-1984) in 2012 for the Atari brand's 40th anniversary.

Congratulations! I'm very much looking forward to reading this. Hopefully it will receive some mainstream attention and press coverage, too.