The History of Atari

Every story has a beginning, and the history of Atari is no exception, but not every story has an end. This one hasn't reached its end yet (though many think it's about time). Its beginning, however, takes us back years into the past. And, hard as it is to believe, it doesn't start with its main protagonists, but with a MIT student.

The First Video Games

It all began in 1961, with a certain Steven Russell and his nerd friends at MIT. These guys were terrible geeks, the archetype of nerds who dream of Star Trek and similar things. But they weren't ordinary nerds; they had the knowledge to back up their hobbies. You could call them true little geniuses. One day, Russell, tired of talking about spaceships and space exploration, started thinking about a video game.

It's worth noting that thinking about a video game was already prodigious for the time. They practically hadn't been invented yet. As a precursor, we can find OXO, a tic-tac-toe game made for the EDSAC computer, programmed in 1952 by Alexander S. Douglas. OXO is little known, and that's because the EDSAC was unique to the University of Cambridge.

Douglas's game was followed by the one William Higinbotham programmed with an oscilloscope in 1958. What he did was very ingenious. He used a small analog computer and drew the trajectory of a tiny ball on a laboratory oscilloscope. As a screen, he used its viewfinder. To play it, Higinbotham created a device that served as a control. The game was called Tennis for Two and is considered by many the first video game ever made.

Spacewar!

A few years later, in 1962, Steve Russell had already gotten to work. Using a PDP-1 computer the size of a wardrobe, which ran on punched cards and cost just under $120,000, Steve finally finished his game, which he called Spacewar!. It only took up 9k (which, at the time, was a lot).

The premise of Spacewar! was as follows: Two ships in a very rustic 2D, black and white with a fixed screen, fought each other. Battles had to be between players, as there wasn't enough memory to program what today is known as Artificial Intelligence.

Spacewar! was truly the first more-or-less massive video game, since thanks to ARPANET, the precursor of today's Internet, it spread to other universities. And soon all the nerds were playing. It's worth noting that Russell did not patent his game. He wanted it to be freely distributed, a true pioneer of free software.

The History of Atari

And why so much talk? Isn't this the history of Atari, after all? Well, yes, but without Russell's creation, it's hard to know what would have happened to Nolan Bushnell, the true protagonist of our story. Bushnell's first steps in the world of video games came with Computer Space, a clone of Spacewar!.

Nolan was one of the many addicts to Russell's game. A visionary—and a bit of a thief—in the early '70s, Nolan began developing a prototype of a coin-operated machine (coin-op or arcade) that imitated his favorite game. That's how Computer Space was born, a true commercial clone of Spacewar! and the first coin-operated video game.

Nutting Associates was in charge of distribution, with 1,500 machines in different parts of the country. The game was a huge failure. Computer Space was too difficult to handle for most people (people who had never seen a video game). It had too many knobs and buttons, which scared off potential customers who just wanted to have a good time without complications. Fortunately, Bushnell would learn from his mistakes and his next game would be an unprecedented hit. Which game are we talking about? Pong, of course!

Although Computer Space was not a sales hit, it taught Bushnell an important lesson: for the time being, the world was not ready for complicated games. In an interview from those years, Nolan explained why the game had failed: "You had to read the instructions before playing, and people don't want to read instructions. If I wanted to be successful, I had to invent a game that people already knew how to play; something so simple that any drunk in any bar could understand."

With that idea in mind, Nolan recruited his friend Ted Dabney and they became partners. The company was initially called Syzygy, but in June 1972 it was renamed Atari (incredibly, the name Syzygy was already taken). Not many know this, but Atari is a kind of checkmate in the Chinese board game Go, a game Nolan was always very fond of. Atari was founded with just $500, $250 from Nolan and $250 from Ted.

Pong

With Atari officially established, Bushnell needed a game and looked for inspiration in the Magnavox Odyssey, the world's first commercial console. The Magnavox Odyssey had a game that Nolan loved for its simplicity. That game was Tennis and was identical to what would later become Pong. The person responsible for programming Pong was Allan Alcron, and his mission was to make a clone of Tennis that was as cheap as possible.

The first prototype of Pong was tested in a bar in Sunnyvalley, whose owner was Andy Capps. Andy wasn't very fond of electronic things, but Nolan eventually convinced him. No more than a few days had passed when Capps called Bushnell to tell him his machine was crap, that it didn't work. It turned out the machine was so clogged with coins that it had stopped working. Pong had been a true success! Aware of the possibilities of "his" invention, he decided he wouldn't sell the license to anyone.

Atari would distribute its own games, keeping all the money. But Bushnell needed capital; his $500 investment wouldn't be enough for the demand they expected. Getting a loan was a nightmare for Nolan. Banks looked unfavorably on everything to do with interactive entertainment, which had a bad reputation for being associated with mafias and casinos. To make matters worse, the entrepreneur's hippie image worked against him. Finally, after many back-and-forths, Nolan obtained a loan for $50,000.

$50,000 was still very little money back then. Bushnell had to think hard about how to carry out his plan with so little capital. It was then, enlightened by his incredible business genius, that Nolan Bushnell rented an abandoned skating rink, hired some unemployed people (taken from an employment agency and paid in coins) and began producing the machines.

The workforce wasn't specialized; many didn't even have knowledge of electronics. But that didn't worry Bushnell, and he was determined to teach them the trade. Little by little, everyone learned and the demand for units was met. By the end of 1972, Atari had already sold more than 8,500 machines. With a cost of $500 and a selling price of $1,500, Atari began to grow by leaps and bounds.

Bushnell wasn't the only one making money; the deal was also generous with everyone who bought his game. The arcade machine made an average of $200 per week. Bar owners were delighted with Atari. By the end of 1974, every bar in the United States had a Pong; it was essential. The problem for Bushnell, however, was that only a third of those machines were his property. With the success of Pong, and in the absence of licenses, dozens of companies began making clones that sold cheaper than the original game.

Ralph Baer's Patent

They say that whoever robs a thief has a hundred years of forgiveness, right? Because despite Bushnell's anger, there was little he could do. The patent didn't belong to him, but to Ralph Baer and the company Magnavox. The patent, written by Baer, read: "The present invention pertains to an apparatus and a method, in conjunction with standard televisions, monochrome or color, for the generation, display, and use of symbols or geometric figures on the television screen for the purpose of training simulations, playing games, and performing other activities among one or more participants." The very detailed patent then continues describing the controls and the way to play, among other things. (See patent.)

The success of Pong, as expected, attracted the attention of Ralph Baer and his company. Magnavox demanded payment from Nolan Bushnell for the use of the patent. Bushnell, knowing he would lose, didn't want to go to court. Finally, he ended up paying $700,000 for a contract that allowed him to commercialize all kinds of games without paying any royalties. He got off very cheap, very, very cheap. Following the success of Pong, what is known today as the Coin-Op Fever exploded. Dozens and dozens of arcade games came out year after year. And that's how the real video game industry began.

Sears Telegames

Even though Atari was doing very well making arcade games, the number of clones coming out of its machines, along with competition from other companies with their own games, was shrinking profit margins. Bushnell wanted (and needed) to capitalize on his titles in another way. And that's how, in 1974, he began working on a home version of Pong, under the code name Darlene.

Nolan, now a true business expert, managed to get the Sears store chain interested in the product and signed a contract to distribute the console in its stores. The console, with a single game in memory (Pong), went on sale during Christmas '75 under the name Sears Tele-Games. People, excited, lined up at the entrance of Sears to buy it. The Sears Tele-Games was the best-selling product of that year.

Quick as a wink, clones didn't take long to appear. The first was from Coleco, a company that recruited the genius Baer to emulate the success of Bushnell's company. It didn't do badly at all either. It sold almost half of what Atari had sold. Following the success of Tele-Games, Atari continued adapting arcade hits to home versions: games like Steeplechase, Stellar Track, and Submarine Commander were seen under this brand. These little consoles were the precursor to one of the most important consoles in the world, the Atari 2600.

Atari VCS (Atari 2600)

Proving it could be done, despite the failure of Magnavox and the imminent Fairchild, Atari set to work developing its own game system with interchangeable cartridges. What Nolan Bushnell wanted was to give his games a longer lifespan, to have more sustained sales over several years. The idea was excellent, and Atari had everything to make it happen... except the money. Bushnell understood that if he wanted to become a giant, he would need the necessary capital. To that end, in 1976 he sold the company to Warner Communications with the promise that the company would soon finish developing the system (which was being worked on under the code name Stella).

In 1977, the Atari VCS (Video Computer System), better known as the Atari 2600, hit the market. But people were already a bit fed up with playing Pong and had trouble understanding the idea of "interchangeable cartridges." For that reason, sales of the Atari 2600 were slow at first. Gradually, as customers understood its potential, the system began to gain popularity and sell many more units.

But it wasn't until 1980 that Atari's system became a true sales milestone, with the Space Invaders license from Taito. Space Invaders had taken arcades by storm, and there was genuine passion for the game. When Atari licensed the game, promising that everyone could play it in the comfort of their own home, sales grew exponentially. In the following years, Atari would earn $2 billion in sales of consoles and games.

And where had Nolan Bushnell gone in all this? In 1978, Nolan was practically kicked out of the company he had built from the ground up. The reasons were several: Bushnell's liberal policy toward Atari employees, the closed software strategy, and the lifespan of the VCS system.

Beyond Nolan Bushnell

And the story goes much further, right up to today. And yes, many things happened in between. But nothing was ever the same for Atari without Nolan Bushnell at the helm, and after the Video Game Crash of '83.

The policies of Warner Communications caused the best minds of the company to emigrate elsewhere; bad games like ET and the version of Pac-Man sank the company's reputation; people began to get bored with its games, and new competitors emerged, claiming a piece of the market.

By the late 80s, Atari barely survived. During the 90s, it fell into a coma, thanks (or due to) Sony, Sega, and Nintendo. Today, it is known as an infamous company that retains little of the glamour of its early years, releasing mediocre titles or remasterizations of its classic games and even a "mini" version of its most popular console.