5 Surprising Facts About The Video Game Crash of 1983

The Great Video Game Crash of 1983 is a tale that many a gamer knows to the point that it could be recited by heart. After legendary developer Nolan Bushnell created Pong in 1972, the video game industry was born. It gave birth to arcades and gaming came to homes with the release of video game consoles in the late 70s, such as the Atari 2600 and Intellivision.

Things were coming along smoothly until 1982. That’s when Atari released a game based on the most popular movie at the time: E.T. the Extra-Terrestrial. This single game is considered one of the worst (if not the worst) game in video game history. It was a debacle that resulted in an industry wide crash in 1983.

By 1985, various gaming companies were shutting down including Atari. But, like a phoenix rising from the ashes, a small Japanese company released the Nintendo Entertainment System (or NES for short). The NES kicked off a renaissance for the video game industry. Video gaming has been alive and kicking ever since.

The Video Game Crash of 1983 has spawned several books, YouTube videos, and even a couple of documentaries. It’s also mostly wrong; yes, you read that right. Some parts of this tale in gaming history are true, such as the fact that yes all the unsold copies of E.T. ended up in a landfill. But there are still a few facts about this event that people get wrong.

Here are five facts about the crash that most people don’t know about.


1. E.T. Wasn’t Solely Responsible for The Crash


We will start this off with the big one. No, E.T. for the Atari 2600 didn’t singlehandedly crash the game industry in 1983. Make no mistake, the game is terrible and it did bomb. It cost Atari a ton of money (they had spent roughly $20-$25 million just getting the license). It was certainly a factor in the crash, but it wasn’t THE reason for the crash.

When the E.T. game was first released, it sold quite well, selling 1.5 million copies and was the fourth bestselling game of December 1982 and January 1983. So if wasn’t E.T., what was it, I hear you ask? Well, while there were multiple factors that played a role such as inflation and competition from home computers at the time, the biggest cause of the crash was as simple as a flooded market.

You see by 1983, there were a total of nine consoles on the market at the time (that number jumps to twelve when you consider store exclusive clone versions of these consoles), with more consoles on the way, and hundreds of third party developers making games for each system. It was already pretty confusing by 1982 as to which console to get, but it was made even worse by the fact that there were so many poor quality games that flooded the market at this time, as many of the big console makers had little in way of quality control, if at all, the result being companies that had no business making games putting out what would be classified today as shovelware. The increase in these poorly made games was so drastic, that many games would cost as little as $5 when they were first released, whether they were big budget releases or cheap budget titles.

Combine this with the high profile flops like Pac-Man for the Atari 2600 and the aforementioned E.T., plus the fact that many of these companies made terrible business decisions (Atari was famous around this time for buying 12 million copies of Pac-Man, thinking that all 10 million Atari 2600 owners at the time would buy the game, with 2 million people buying the system just to play Pac-Man), and you have a recipe for disaster. So yes, long story short, E.T. may have been a terrible game that ultimately ruined Atari, but by the time that happened, both Atari and its competitors had dug themselves so deep into a hole that there was no way for them to get out.

2. The Crash Was Only a North American Phenomenon

If you ever look up the Video Game Crash of 1983 on Google, chances are the first link you’ll find is a Wikipedia page called “North American Video Game Crash of 1983”; this isn’t a typo either. While companies like Atari, Mattel, and the like were rapidly losing money and going out of business, the rest of the world was not only unscathed at this time, but was actually doing well.

In Japan for example, the home console market was booming thanks in part to a toy company at the time by the name of Nintendo, who took Japan by storm in 1983 with the release of the Family Computer, or the Famicom as it was known. You may have heard of it over here as the Nintendo Entertainment System (I’ll talk about that in a bit). Actually, fun fact: did you know that at one point Atari and Nintendo had a deal wherein Atari would release the Famicom here in the states? Nintendo at the time wanted to release the Famicom in North America, and made a deal with Atari to help them release the system overseas, with Nintendo getting a share of each sale; the deal unfortunately fell through when Atari started losing money, and the executives in charge of the deal resigned, with Nintendo ultimately deciding to go it alone.

Meanwhile, across the pond in Europe, PC gaming was the dominating source of gaming there with systems such as the ZX Spectrum and the Amstrad CPC line of computers. In fact, PC gaming was so popular Europe, that it was not only the dominant force of gaming throughout the 80s (so dominant in fact that not even gaming juggernaut Nintendo could overtake them), but it also birthed a massive movement of novice programmers making their own games and finding success, with famous industry figures like Peter Molyneux and Richard Garriot (of Ultima fame) getting their start this way. And of course, all over the world, arcades were still around and kicking, being incredibly popular in many parts of the world, even in the United States surprisingly. Speaking of which….

3. Arcades Were Able to Survive The Crash


After the runaway success of Pong in 1972, arcades became incredibly popular across the US, kicking off what many people described as golden age, with such classic games as Pac-Man, Centipede, and Donkey Kong to name a few being released at almost steady stream, with sales totaling $8 billion in 1981, which was more money than the combined ticket sales of Major League Baseball, the NBA, and the NFL combined. Of course, arcade games weren’t immune from the effects of the crash in 1983, as there was a drop to $5 billion in sales in 1983, to a low of $4 billion by 1986, which in all honesty, while quite a loss of revenue, is still pretty good when compared to home consoles at the time. No, the bigger affect the crash had on arcades was the fact that multiple arcades that were dedicated to them were shutting down all over the US. Thankfully however, due to the design of arcade machines themselves, such places weren’t really necessary for the games to survive.

What do I mean by that? Well simply put, because most arcade machines didn’t really need any major setup, they could be set up at just about any major business that had an electrical outlet. And that’s just what happened, as arcade machines would soon show up just about anywhere, from department stores, bowling allies, shopping malls, and especially in entertainment restaurants like Chuck E. Cheese (which was the brain child of Atari co-founder and Pong creator Nolan Bushnell). Granted, sales weren’t as high as they were between 1983 and 1986 as they were before the crash, but because of arcade machines showing up in places that weren’t arcades was just enough to keep the arcade business afloat for a few years, experiencing a slight resurgence in popularity 1987 with the debut of Double Dragon and the birth of the beat ‘em up genre, becoming insanely popular once again in the early 90s with the release of Street Fighter II, before sadly seeing a rapid decline in the late 90s, as consoles at the time were able to replicate the arcade experiences at home with less of the cost of arcade machines. A bit of a sad ending for arcade machines in the US I admit, but it would have been a much sadder tale if arcades had ended in 1983, wouldn’t you say?

4. The Crash Influenced How Nintendo Did Business In America


So we all know at this point that after Atari and all the major western game developers either went out of business or were severely weakened, Nintendo swooped in the late 80s to revive the industry, which has been going strong ever since. What many people may not know however was that at their corporate headquarters in Kyoto Japan, Nintendo was well aware of the crash and the effect it had on the US market. They knew that if they went in too strong after such a devastating collapse in 1983, they would be doomed. So when Nintendo released what would be called the Nintendo Entertainment System, Nintendo did things differently than its western counterparts, both in terms of the system itself, and when it came to making, releasing and marketing games.

For starters, Nintendo initially didn’t call the NES a “video game system”, but rather a “entertainment system” so as to avoid the stigma of video games at the time, as well as designing the NES to look a lot like VCRs at time with the console front loaded instead of top (though toward the end of the console’s life, a top loaded version was released). Instead of releasing the NES nationwide, Nintendo did a limited launch in New York City test markets in the fall 1985 to see how the console would do, with it getting a national release a year later. To add to the appeal of the console at launch and make it look like a novelty toy, the NES was bundled with an odd looking accessory called the Robotic Operating Buddy, or R.O.B. for short, who you youngsters out there may recognize as that playable robot character in Super Smash Bros. Finally, to combat the stagnation that Atari had with low quality games, Nintendo actively courted third party developers, though they had to play by Nintendo’s rule.

These rules included Nintendo themselves being in charge of manufacturing all games themselves, have each third party game in question be approved by Nintendo first before being released, ordering at least 10,000 copies of the game (which was expensive at the time), and limiting all third party developers to five game releases a year, though most publishers found a way around this by starting new developers of their own, such as Konami with Ultra Games and Acclaim using infamous developer LJN in the early 90s. These rules were in place to make sure that there wouldn’t be a repeat of the low quality games released on the Atari 2600 (though there’s no denying that the system had a few stinkers during its life cycle), and while the jury is still out on whether or not these choices Nintendo made were the right ones, as many third parties were no longer exclusive or straight up left Nintendo in the 90s to work with Sega and Sony on their respective systems, there’s no denying the impact Nintendo had on the industry, with many of the ideas they brought to the table such as directional pads have become industry standards, not to mention all the great franchises that spawned from the NES, such as Super Mario Bros. and The Legend of Zelda. And all of that may not have happened if Nintendo didn’t take the lessons of the 1983 crash to heart.

5. Yes, There Was A Landfill Of Atari Games, But It’s Not What You Think


(Thanks in advance to The Gaming Historian, who first mentioned this in one of his videos)

So for those of you who don’t know, after Atari started losing money, it was rumored that in an effort to cut their losses, Atari took the millions of unsold copies of E.T., drove them to a New Mexico landfill in the cover of night, where they were buried and covered with cement, never to be seen again. It’s been a topic of much discussion over the years, and was even the focus of a documentary made in 2014 called Atari: Game Over, which chronicled the search, and ultimately the discovery, of this landfill, which many people for years had considered an urban legend. While the story is ultimately true, there have been a few facts that most people probably aren’t aware of.

For starters, contrary to popular belief, Atari didn’t make their activity hidden, and if they did, they clearly failed at it, as several newspapers at the time reported on the games being dumped, with one newspaper using the admittedly hilarious headline, “City to Atari: ‘E.T.’ trash go home”, after the city of Alamogordo, New Mexico, the place where the cartridges were dumped, complained about it. Second, it wasn’t just copies of E.T. that were destroyed, but also copies of Pac Man and other various titles, with about 700,000 games in total being destroyed. Finally, while it is true that Atari needed to find a way to save money, the reason the games were taken to a landfill was because their plant in El Paso, Texas was being shut down and turned into a recycling plant, not necessarily because of the games themselves (though admittedly that certainly didn’t help). However, Atari didn’t want to just throw everything in their plant in the dumpster behind their building and call it day, so they drove their entire inventory to Alamogordo to bury their unsold games, since it’s against the law to dig through a landfill in the state of New Mexico. Of course, that didn’t stop people from going through it anyway and grabbing what they could, so shortly afterwards, Atari put some cement over the games, where they laid buried for years. So yes, in short, while it’s certainly one of the few stories about the crash that’s true, there are still a few facts about the incident that many gamers have left out, crossed wires on, or completely forgot about all together. Facts that I feel make the story a lot more interesting.


In this day and age of games being broken at launch, Steam’s Early Access service running rampant with poor quality games, and the rise of mobile phone games that often times seem more concerned about making money than being good games, it’s easy to assume that the industry is on its way to yet another crash. But while things can look a bit grim now, it’s important to remember that things are much different now than they were thirty years ago, such as publishers having more stringent guidelines on what can be developed on their systems, spending more money on quality assurance testing, and consumers being much more informed then they were years ago, thanks to the Internet. Of course, that’s not to say that every game that has been released is a perfect 10/10 game of the year contender, nor is to safe for us to ignore the lessons of the Video Game Crash of 1983. Indeed, no industry is fail proof, but considering gaming has been alive and kicking for thirty years now, it’s safe to say that the chances of experiencing another crash happening are pretty slim for the time being.