Video game crash of 1983

A long time ago, video games had a hard time.

Many companies made too many games. Many of these games were not very good. This made people lose interest in playing them.

People also started buying home computers. These machines could play games and do other work. This made the game market very small.

Because of this, many game companies lost all their money. It was a very tough time for video games.

Later, a new system helped games become popular again.

In the early 1980s, the video game industry hit a hard time. This was a big drop in sales called the crash of 1983.

It lasted from 1983 to 1985 in the United States.

One reason for the crash was too many games. Before 1979, only the makers of consoles made games. Then, new companies called third-party developers started making them.

Many of these new companies were not experts. They made many games that were poor quality. This meant there were too many bad games on store shelves.

Other things caused the crash, too. People began buying home computers instead of game consoles.

Computers like the Commodore 64 could do more than play games. They could also do work like typing. Computers were often better at sound and color.

The crash was very big. Sales fell from $3.2 billion to $100 million. Many companies lost all their money. But games came back later. The Nintendo Entertainment System, or NES, helped games become popular again in 1985.

In the early 1980s, the video game industry faced a massive problem. This event is known as the video game crash of 1983.

It was a huge recession that lasted from 1983 to 1985 in the United States. During this time, the business of selling games almost disappeared. Home video game revenue was very high in 1983 at $3.2 billion. However, by 1985, that number fell to only $100 million. This was a drop of almost 97 percent.

Many companies went bankrupt because they could not make enough money.

Several things caused this crash to happen at once. First, the market became saturated with too many consoles and games.

Before 1979, only console makers made games for their own systems. Then, third-party developers began making games for other consoles. One famous group was Activision, which was started by four former Atari programmers. While some games like Pitfall! were great, many new companies lacked skill. They rushed to make quick profits by creating poor quality games. This led to a flood of bad games that filled store shelves.

Making too many games also caused a big surplus. In 1982, there were about 100 Atari games on the market. By December of that year, that number grew to over 400.

Manufacturers thought demand would keep growing forever. An analyst for Goldman Sachs noted that manufacturing output grew by 175 percent. This was much higher than the 100 percent growth in actual demand. Because of this, companies had huge amounts of unsold games. They had produced over 200 percent of what people actually wanted to buy.

At the same time, home computers became a big threat to consoles.

Computers like the Commodore 64 and the TI-99/4A could do much more than play games. They could also handle tasks like typing or accounting. These computers often had better sound and more colorful graphics. They used floppy disks or tapes instead of expensive cartridges. A price war between companies made computers very cheap. By 1983, some computers cost as little as $199. People began to wonder why they should buy a console that only played games.

The video game industry eventually found a way to recover. This happened a few years after the crash ended.

The success came from a company called Nintendo. They released the Nintendo Entertainment System, or NES, in October 1985. The NES was designed to avoid the mistakes of the past. It helped fix the bad reputation that video games had at that time. This new system helped bring fun, high-quality games back into homes across North America.

The video game crash of 1983 was a massive economic recession within the video game industry.

This period of decline occurred in the United States between 1983 and 1985. It is sometimes referred to as the "Atari shock" in Japan. The crash effectively ended what historians call the second generation of home video game consoles in North America. During this era, the industry shifted from a period of rapid growth into a period of deep instability. Many companies that produced home computers and game consoles went bankrupt because of the sudden loss of revenue.

The scale of the financial loss was staggering. In 1983, home video game revenue reached a peak of approximately $3.2 billion. By 1985, that revenue had plummeted to about $100 million. This represents a massive drop of nearly 97 percent.

While the home console market collapsed, the arcade video game market also weakened as its "golden age" came to an end. Analysts at the time grew deeply skeptical about whether video game consoles and software would ever be viable again.

One primary cause of the crash was market saturation. This happens when there is too much of a product available for the number of people who want to buy it. In the early 1980s, several different consoles competed for players, including the Atari VCS, Odyssey², Intellivision, ColecoVision, Atari 5200, and Vectrex. The Atari VCS, later renamed the Atari 2600, was the most popular system, holding 58 percent of the market in 1982. However, the ColecoVision held about 17 percent, posing a real threat to Atari's dominance. Manufacturers over-projected how much people would buy. A Goldman Sachs analyst noted that while demand rose by 100 percent, manufacturing output rose by 175 percent. This created a massive surplus of unsold goods.

A second major factor was the loss of publishing control. Before 1979, console makers published all the games for their own systems. This changed when four former Atari programmers founded Activision. They wanted recognition and royalties for their work, similar to musicians or directors. After a legal battle, a 1982 settlement legitimized third-party developers. This meant other companies could now make games for existing consoles. While Activision produced hits like "Pitfall!", which sold over four million units, many other companies lacked experience. These inexperienced developers rushed to the market to make "quick profits." They produced many low-quality games, such as "Lost Luggage" and "Dishaster."

The sheer volume of new software overwhelmed the market. In June 1982, there were only 100 Atari games available. By December 1982, that number had exploded to over 400.

Experts predicted a "glut," meaning an excessive supply. They estimated that only 10 percent of games would generate 75 percent of all sales. By 1982, production of cartridges was over 200 percent of the actual consumer demand. This led to huge amounts of unsold inventory sitting in warehouses and on store shelves.

At the same time, the rise of the personal computer provided stiff competition.

Computers like the Commodore 64 and the TI-99/4A could do much more than just play games. They could handle word processing and home accounting. Because computers had more memory and faster processors, they allowed for more sophisticated games. They also used floppy disks or cassette tapes instead of expensive ROM cartridges. A price war between Commodore and Texas Instruments made computers very affordable. By 1983, some computers cost as little as $199. Consumers began to ask why they should buy a console that only played games when a computer could do much more.

Despite this era of failure, the industry eventually recovered. The recovery was driven largely by the success of Nintendo. In October 1985, Nintendo released the Nintendo Entertainment System, known as the NES.

The NES was specifically designed to avoid the mistakes that caused the 1983 crash. It was built to overcome the negative stigma that had attached itself to video games. By introducing a new way to brand and sell consoles, Nintendo helped rebuild the North American market. This allowed the video game industry to move past the recession and begin a new era of growth.