Editing Video game crash of 1983 (section)

== Immediate effects ==
With the release of so many new games in 1982 that flooded the market, most stores had insufficient space to carry new games and consoles. As stores tried to return the surplus games to the new publishers, the publishers had neither new products nor cash to issue refunds to the retailers. Many publishers, including [[Games by Apollo]]<ref>{{Citation |last=Seitz |first=Lee K. |title=CVG Nexus: Timeline – 1980s |url=http://home.hiwaay.net/~lkseitz/cvg/nexus/features/timeline/1980s.shtml |access-date=November 16, 2007 |archive-url=https://web.archive.org/web/20071013165228/http://home.hiwaay.net/~lkseitz/cvg/nexus/features/timeline/1980s.shtml |archive-date=October 13, 2007 |url-status=dead }}</ref> and [[U.S. Games]],<ref name=prince198309>{{cite magazine |last=Prince |first=Suzan |date=September 1983 |title=Faded Glory: The Decline, Fall and Possible Salvation of Home Video |url=https://archive.org/stream/Video_Games_Volume_1_Number_12_1983-09_Pumpkin_Press_US#page/n17/mode/2up |magazine=Video Games |publisher=Pumpkin Press |access-date=February 24, 2016 }}</ref> quickly folded. Unable to return the unsold games to defunct publishers, stores marked down the titles and placed them in discount bins and sale tables. Recently released games which initially sold for US$35 (equivalent to $116 in 2024) were in bins for $5 ($16 in 2024).<ref name=prince198309/><ref name="daglow198808">{{cite magazine |title=The Changing Role of Computer Game Designers |magazine=[[Computer Gaming World]] |date=August 1988 |last=Daglow |first=Don L. |pages=18, 42 |issue=50 |url=https://archive.org/details/Computer_Gaming_World_Issue_50/page/n17/mode/2up}}</ref><ref name="high score activision crash"/>

The presence of third-party sales drew the market share that the console manufacturers had. Atari's share of the cartridge-game market fell from 75% in 1981 to less than 40% in 1982, which negatively affected their finances.<ref>{{cite news|last=Rosenberg|first=Ron|title=Competitors Claim Role in Warner Setback|url=https://pqasb.pqarchiver.com/boston/access/666912291.html?FMT=ABS&FMTS=ABS:FT&type=current&date=Dec+11%2C+1982&author=Ron+Rosenberg+Globe+Staff&pub=Boston+Globe+%28pre-1997+Fulltext%29&desc=COMPETITORS+CLAIM+ROLE+IN+WARNER+SETBACK&pqatl=google|access-date=March 6, 2012|newspaper=[[The Boston Globe]]|date=December 11, 1982|page=1|url-status=dead|archive-url=https://web.archive.org/web/20121107073803/http://pqasb.pqarchiver.com/boston/access/666912291.html?FMT=ABS&FMTS=ABS:FT&type=current&date=Dec+11%2C+1982&author=Ron+Rosenberg+Globe+Staff&pub=Boston+Globe+%28pre-1997+Fulltext%29&desc=COMPETITORS+CLAIM+ROLE+IN+WARNER+SETBACK&pqatl=google|archive-date=November 7, 2012}}</ref> The bargain sales of poor-quality titles further drew sales away from the more successful third-party companies like Activision due to poorly informed consumers being drawn by price to purchase the bargain titles rather than quality. By June 1983, the market for the more expensive games had shrunk dramatically and was replaced by a new market of rushed-to-market, low-budget games.<ref name="Gamasutra Activision">{{cite web|url=https://www.gamedeveloper.com/business/the-history-of-activision |title=The History Of Activision | work = Gamasutra | first =Jeffrey | last =Flemming |access-date=December 30, 2016 |url-status=live |archive-url=https://web.archive.org/web/20161220122651/http://www.gamasutra.com/view/feature/1537/the_history_of_activision.php?print=1 |archive-date=December 20, 2016}}</ref> Crane said that "those awful games flooded the market at huge discounts, and ruined the video game business".<ref name=aa20160509>{{cite web |url=http://www.arcadeattack.co.uk/david-crane/ |title=INTERVIEW{{snd}}DAVID CRANE (ATARI/ACTIVISION/SKYWORKS) |work=[[Arcade Attack]] |date=May 9, 2016 |access-date=May 10, 2016 |author=Adrian |url-status=live |archive-url=https://web.archive.org/web/20160509160135/http://www.arcadeattack.co.uk/david-crane/ |archive-date=May 9, 2016 }}</ref>

A massive industry shakeout resulted. [[Magnavox]] abandoned the video game business entirely. [[Imagic]] withdrew its [[Initial public offering|IPO]] the day before its stock was to go public; the company later collapsed. Activision had to downsize across 1984 and 1985 due to loss of revenue, and to stay competitive and maintain financial security, began development of games for the personal computer. Within a few years, Activision no longer produced cartridge-based games and focused solely on personal computer games.<ref name="Gamasutra Activision"/><ref name="high score activision crash"/>

[[File:Atari E.T. Dig- Alamogordo, New Mexico (14036097792).jpg|thumb|right|Partially surviving cases and cartridges retrieved during the 2014 excavation of the Alamogordo, New Mexico landfill Atari had used in 1983. ''E.T.'', ''[[Centipede (video game)|Centipede]]'', and other Atari materials can be seen.]]
Atari was one of those companies most affected by the crash. As a company, its revenue dropped significantly due to dramatically lower sales and cost of returned stock. By mid-1983, the company had lost {{USD|356 million}}, was forced to lay off 30% of its 10,000 employees, and moved all manufacturing to Hong Kong and Taiwan.<ref name=":22">{{Cite book |last=Kocurek |first=Carly A. |title=Coin-operated Americans: rebooting boyhood at the video game arcade |date=2015 |publisher=University of Minnesota Press |isbn=978-0-8166-9183-8 |location=Minneapolis London}}</ref> Unsold ''Pac-Man'', ''E.T. the Extra-Terrestrial'', and other 1982 and 1983 games and consoles started to fill their warehouses. In September 1983, Atari discreetly buried much of this excess stock in a landfill near [[Alamogordo, New Mexico]], though Atari did not comment about their activity at the time. Misinformation related to sales of ''Pac-Man'' and ''E.T.'' led to the [[urban legend]] of the [[Atari video game burial]], that millions of unsold cartridges were buried there. Gaming historians received permission to dig up the landfill as part of a documentary in 2014, during which former Atari executive James Heller, who had overseen the original burial clarified that only about 728,000 cartridges had been buried in 1982, backed by estimates made during the excavation, and disproving the scale of the urban legend.<ref name="npr">{{cite news |title=Diggers Find Atari's E.T. Games in Landfill |agency=Associated Press |date=April 26, 2014 |url=https://www.npr.org/templates/story/story.php?storyId=307031037 |access-date=April 26, 2014 |url-status=dead |archive-url=https://web.archive.org/web/20140426232656/http://www.npr.org/templates/story/story.php?storyId=307031037 |archive-date=April 26, 2014 }}</ref> Atari's burial remains an iconic representation of the 1983 video game crash.<ref name="InfoWorld">{{cite magazine |first1=John C |last1=Dvorak |date=August 12, 1985 |title=Is the PCJr Doomed To Be Landfill? |magazine=[[InfoWorld]] |volume=7 |issue=32 |page=64 |url=https://books.google.com/books?id=Ai8EAAAAMBAJ&q=atari+landfill&pg=RA1-PA64 |access-date=September 10, 2011 |archive-date=February 9, 2023 |archive-url=https://web.archive.org/web/20230209133536/https://books.google.com/books?id=Ai8EAAAAMBAJ&q=atari+landfill&pg=RA1-PA64 |url-status=live }}</ref><ref name="PCAdvisor">{{cite web|url=http://www.pcadvisor.co.uk/news/tablets/3298074/hp-touchpads-to-be-dumped-in-landfill/ |title=HP TouchPads to be dumped in landfill? |first=Simon |last=Jary |publisher=[[PC Advisor]] |date=August 19, 2011 |access-date=September 10, 2011 |url-status=live |archive-url=https://web.archive.org/web/20111108045640/http://www.pcadvisor.co.uk/news/tablets/3298074/hp-touchpads-to-be-dumped-in-landfill/ |archive-date=November 8, 2011 }}</ref><ref name="WSJ">{{cite news |url=https://www.wsj.com/articles/SB10001424053111904006104576502744235853146?mod=googlenews_wsj |title=Book Review: Super Mario |newspaper=[[Wall Street Journal]] |first=James |last=Kennedy |date=August 20, 2011 |access-date=September 10, 2011 |url-status=live |archive-url=https://web.archive.org/web/20170906225910/https://www.wsj.com/articles/SB10001424053111904006104576502744235853146?mod=googlenews_wsj |archive-date=September 6, 2017 |url-access=subscription}}</ref> By the end of 1983, Atari had over {{USD|536 million}} in losses, leading Warner Communication to sell Atari's consumer products division in July 1984 to [[Jack Tramiel]], who had recently departed Commodore International. Tramiel's new company took the name [[Atari Corporation]], and they directed their efforts into developing their new personal computer line, the [[Atari ST]], over the console business.<ref name="ultimate chp14">{{cite book |title=Ultimate History of Video Games |first=Steven |last=Kent |page=190 |publisher=[[Three Rivers Press]] |isbn=0-7615-3643-4 |year=2001 | chapter=Chapter 14: The Fall | url=https://archive.org/details/ultimatehistoryofvideogamesrevisited/ |chapter-url=https://archive.org/details/ultimatehistoryofvideogamesrevisited/page/n233/mode/2up}}</ref>

Lack of confidence in the video game sector caused many retailers to stop selling video game consoles or reduced their stock significantly, reserving floor or shelf space for other products.<ref name="g4tv gamemakers"/> Retailers established to exclusively sell video games folded, which impacted sales of personal computer games.
<ref name="high score activision crash">{{cite book|last1=DeMaria|first1=Rusel|last2=Wilson|first2=Johnny L.|title=High Score!: The Illustrated History of Electronic Games|date=2003|publisher=McGraw-Hill/Osborne|location=New York|isbn=0-07-223172-6|pages=103–105|edition=2}}</ref>

The full effects of the industry crash were not felt until 1985.<ref>{{cite magazine |last=Katz |first=Arnie |title=1984: The Year That Shook Electronic Gaming |magazine=[[Electronic Games]] |date=January 1985 |volume=3 |issue=35 |pages=30–31 [30] |url=https://archive.org/stream/electronic-games-magazine-1985-01/Electronic_Games_Issue_35_Vol_03_11_1985_Jan#page/n29/mode/2up |access-date=February 2, 2012}}{{dead link|date=December 2021 |reason=Item taken down from Internet Archive}}</ref> Despite Atari's claim of 1 million in worldwide sales of its 2600 game system that year,<ref>{{cite web|url=http://www.atarimagazines.com/compute/issue71/electronics_show.php|title=A Turning Point for Atari? Report from the Winter Consumer Electronics Show|first=Tom R.|last=Halfhill|url-status=live|archive-url=https://web.archive.org/web/20160409221229/http://www.atarimagazines.com/compute/issue71/electronics_show.php|archive-date=April 9, 2016}}</ref> recovery was slow. The sales of home video games had dropped from $3.2 billion in 1982<ref name="nintendoland">{{cite web |author=Liedholm, Marcus and Mattias |title=The Famicom rules the world!{{snd}}(1983–89) |work=Nintendo Land |url=http://nintendoland.com/history/hist3.htm |access-date=February 14, 2006 |archive-url=https://web.archive.org/web/20100101161115/http://nintendoland.com/history/hist3.htm |archive-date=January 1, 2010}}</ref> to $100 million in 1985.<ref>{{Cite news|url=https://news.google.com/newspapers?id=qKIbAAAAIBAJ&pg=5459,6856521|title=NEC out to dazzle Nintendo fans|last=Dvorchak|first=Robert|date=July 30, 1989|work=The Times-News|access-date=May 11, 2017|page=1D|archive-date=May 12, 2016|archive-url=https://web.archive.org/web/20160512205357/https://news.google.com/newspapers?id=qKIbAAAAIBAJ&sjid=R04EAAAAIBAJ&pg=5459,6856521|url-status=live}}</ref> Analysts doubted the long-term viability of the video game industry,<ref>{{cite web|url=https://news.google.com/newspapers?nid=1320&dat=19821212&id=L2tWAAAAIBAJ&pg=1609,4274079&hl=en|title=Gainesville Sun – Google News Archive Search|access-date=November 22, 2020|archive-date=February 1, 2021|archive-url=https://web.archive.org/web/20210201160250/https://news.google.com/newspapers?nid=1320&dat=19821212&id=L2tWAAAAIBAJ&pg=1609,4274079&hl=en|url-status=live}}</ref> and, according to [[Electronic Arts]]' [[Trip Hawkins]], it had been very difficult to convince retailers to carry video games due to the stigma carried by the fall of Atari until 1985.<ref name="high score activision crash"/>

In late 1985, the [[Nintendo Entertainment System]] saw a limited release in North America, followed by the full national release early the following year.<ref name="high score activision crash"/> Following 1986, the industry began recovering, and by 1988, annual sales in the industry exceeded $2.3 billion, with 70% of the market dominated by Nintendo.<ref>{{citation |title=Toy Trends |work=Orange Coast |date=December 1988 |volume=14 |issue=12 |issn=0279-0483 |publisher=[[Emmis Communications]] |page=88 |url=https://books.google.com/books?id=82AEAAAAMBAJ&pg=PA88 |access-date=April 26, 2011 |archive-date=February 9, 2023 |archive-url=https://web.archive.org/web/20230209133536/https://books.google.com/books?id=82AEAAAAMBAJ&pg=PA88 |url-status=live }}</ref> In 1986, Nintendo president [[Hiroshi Yamauchi]] noted that "Atari collapsed because they gave too much freedom to third-party developers and the market was swamped with rubbish games". In response, Nintendo limited the number of titles that third-party developers could release for their system each year, and promoted its "[[Nintendo#Seal of Quality|Seal of Quality]]", which it allowed to be used on games and peripherals by publishers that met Nintendo's quality standards.<ref name=takiff19860620>{{cite news |last=Takiff |first=Jonathan |title=Video Games Gain in Japan, Are Due For Assault on U.S. |url=https://news.google.com/newspapers?id=QBhcAAAAIBAJ&pg=2846,1271636 |access-date=April 10, 2012 |newspaper=[[The Vindicator]] |date=June 20, 1986 |page=2 |archive-date=February 2, 2021 |archive-url=https://web.archive.org/web/20210202203249/https://news.google.com/newspapers?id=QBhcAAAAIBAJ&pg=2846,1271636 |url-status=live }}</ref>