Editing Video game crash of 1983 (section)

=== Flooded console market ===
[[File:Atari-2600-Wood-4Sw-Set.jpg|thumb|Atari VCS, also known as the Atari 2600, the most popular console prior to the crash|alt=]]

The Atari VCS (renamed the Atari 2600 in late 1982) was not the first home system with swappable [[game cartridge]]s, but by 1980 it was the most popular [[second generation of video game consoles|second-generation console]] by a wide margin. Launched in 1977 just ahead of [[Video game crash of 1977|the collapse of the market]] for home ''[[Pong]]'' console clones, the Atari VCS experienced modest sales for its first few years. In 1980, Atari's licensed version of ''[[Space Invaders]]'' from [[Taito]] became the console's [[killer application]]; sales of the VCS quadrupled, and the game was the first title to sell more than a million copies.<ref name="ultimate chp12">{{cite book |title=Ultimate History of Video Games |first=Steven |last=Kent | author-link = Steven L. Kent |page=190 |publisher=[[Three Rivers Press]] |isbn=0-7615-3643-4 |year=2001 |url=https://archive.org/details/ultimatehistoryofvideogamesrevisited/ |chapter=Chapter 12: The Battle for the Home |chapter-url=https://archive.org/details/ultimatehistoryofvideogamesrevisited/page/n193/mode/2up}}</ref><ref>{{cite book |last=Weiss |first=Brett |title=Classic home video games, 1972–1984: a complete reference guide |year=2007 |publisher=[[McFarland & Company|McFarland]] |location=Jefferson, N.C. |isbn=978-0-7864-3226-4 |page=108}}</ref> Spurred by the success of the Atari VCS, other consoles were introduced, both from Atari and other companies: [[Magnavox Odyssey²|Odyssey²]], [[Intellivision]], [[ColecoVision]], [[Atari 5200]], and [[Vectrex]]. Notably, Coleco sold an add-on allowing Atari VCS games to be played on its ColecoVision, as well as bundling the console with a licensed home version of Nintendo's arcade hit ''[[Donkey Kong (arcade game)|Donkey Kong]]''. In 1982, the ColecoVision held roughly 17% of the hardware market, compared to Atari VCS' 58%. This was the first real threat to Atari's dominance of the home console market.<ref name="ieee history">{{cite journal | title = Innovation and Competition in Standard-Based Industries: A Historical Analysis of the U.S. Home Video Game Market | first1 = Scott | last1= Gallager | first2 = Seung | last2 =Ho Park | date = February 2002 | journal = IEEE Transactions on Engineering Management | volume = 49 | issue = 1 | pages = 67–82 | doi = 10.1109/17.985749 }}</ref>

Each new console had its own library of games produced exclusively by the console maker, while the Atari VCS also had a large selection of titles produced by third-party developers. In 1982, analysts marked trends of saturation, mentioning that the amount of new software coming in would only allow a few big hits, that retailers had devoted too much floor space to systems, and that price drops for home computers could result in an industry shakeup.<ref>{{cite news |last=Jones |first=Robert S. |date=December 12, 1982 |title=Home Video Games Are Coming Under a Strong Attack |newspaper=[[The Gainesville Sun|Gainesville Sun]] |url=https://news.google.com/newspapers?nid=1320&dat=19821212&id=L2tWAAAAIBAJ&sjid=q-kDAAAAIBAJ&pg=1609,4274079&hl=en |via=Google Books |page=21F |access-date=July 26, 2016 |archive-date=June 25, 2020 |archive-url=https://web.archive.org/web/20200625171614/https://news.google.com/newspapers?nid=1320&dat=19821212&id=L2tWAAAAIBAJ&sjid=q-kDAAAAIBAJ&pg=1609,4274079&hl=en |url-status=live }}</ref> Atari had a large inventory after significant portions of the 1982 orders were returned.<ref name=":1">{{Cite journal |last1=Gallagher |first1=S. |last2=Seung Ho Park |date=February 2002 |title=Innovation and competition in standard-based industries: a historical analysis of the US home video game market |url=https://ieeexplore.ieee.org/document/985749 |journal=IEEE Transactions on Engineering Management |volume=49 |issue=1 |pages=67–82 |doi=10.1109/17.985749}}</ref>

In addition, the rapid growth of the video game industry led to an increased demand, which the manufacturers over-projected. In 1983, an analyst for [[Goldman Sachs]] stated the demand for video games was up 100% from the previous year, but the manufacturing output had increased by 175%, creating a significant surplus. Atari CEO [[Raymond Kassar]] recognized in 1982 that the industry's saturation point was imminent. However, Kassar expected this to occur when about half of American households had a video game console. The crash occurred when about 15 million machines had been sold, which soundly under-shot Kassar's estimate.<ref name="nytimes 19832"/> Michael Katz, the president of Atari's electronic division, stated that the console market was too saturated as 30 million consoles were sold by 1982, out of the 35 million households with children between the ages of six and sixteen.{{sfn|Provenzo|1991|p=11}}