The 1980's Collapse of the Video Game Industry

In the late 1970's and early 1980's, the Video Game Industry suffered a painful collapse. I believe a pair of factors contributed to this collapse. Firstly, the industry was seeing an unprecedented flooding of console and game manufacturers, reducing competition (a counterintuitive thought), and creating a supply mountain and a demand valley. Secondly, financial institutions reacted poorly to the state of the market, created a panic, and caused a video game value depression.

Atari had its original 2600, and 5200. Coleco Industries released the ColecoVision and Coleco Gemini. Fairchild released their Channel F as the Channel F System II. Magnavox created the Odyessy, Mattel had Intelivision, Bally had the Astrocade, and more. The consumer market was saturated with consoles and games. Competition vanished, with most new consoles being clones of others. There was no need to compete on a technological level. Instead, companies competed on marketing and pricing. Steven Kent (2001) writes that:

Atari had deeply rooted problems that eventually infected the entire video-game industry. During its heyday, Atari become top-heavy with marketers and other executives. As several ex-Atari people later described the situation, the company had entirely abandoned its carefree youth and become a home for MBAs. (p. 235)

Coupled with the explosion of console creators, there is an even larger collection of game developers. Video Game History, an article at The Dot Eaters (n.d.) claims that, "There are 50 companies publishing games for the 2600 in 1982, companies such as 20th Century Fox, Avalon Hill, CommaVid, Froggo, Milton Bradley, Parker Brothers, Quaker Oats, Sega, Spectravision, Tigervision, Wizard Video Games and Xonox" ("Player 3 Stage 6: The Great Videogame Crash" para. 4).

The massive influx of console and game developers caused a surplus of products that the populace was not prepared to meet. Supply went way up, and demand stayed low. This caused an accompanying drop in the value of consoles and games. Kent (2001) remarks that, "On December 7, 1982, Atari announced that it expected a 10 to 15 percent increase in sales in the fourth quarter. Until that announcement, Atari executives had been talking about an increase of 50 percent. . . . By the time the New York Stock Exchange closed on December 8, Warner stock had fallen 16 3/4 points to 35 1/8 and the video-game industry had begun to collapse" (p. 234). The sheer number of consoles and games were suddenly not worth the plastic that contained them.

The beauty of American commercialism has an ugly side, and the video game industry witnessed this first hand. Decreased competition and market saturation caused the industry to collapse. Fortunately, the collapse paved the way for influx of foreign creations, including the wildly successful Nintendo Entertainment System.

References

Kent, S.L. (2001). The Ultimate History of Video Games. New York: Three Rivers Press

Video Game History 101. (n.d.). Retrieved from The Dot Eaters from http:// www.thedoteaters.com/p3_stage6.php