The Video Game Crash of 1983: A Comprehensive Summary
Introduction
The video game crash of 1983 was a significant downturn in the video game industry, particularly in the United States. This crash abruptly ended the second generation of console video gaming in North America and weakened the arcade video game market.
Causes and Factors
Overcrowded Console Market:
The proliferation of video game consoles and games led to a saturated market. Atari's VCS (later renamed 2600) had a large library of games, but other consoles like Odyssey², Intellivision, ColecoVision, and Vectrex emerged, each with their own exclusive titles.
Loss of Publishing Control:
Prior to 1979, Atari had exclusive rights to publish games for its consoles. However, the formation of third-party developers like Activision weakened their control. While many third-party games were high-quality, a surge of inexperienced companies produced subpar games, further flooding the market.
Competition from Home Computers:
Inexpensive home computers like the ZX81, Commodore 64, and Atari 400 offered more sophisticated games, word processing, and other capabilities. They also allowed for easier game distribution on floppy disks or cassette tapes. As home computers became more affordable, they drew consumers away from video game consoles.
Immediate Effects
- Excessive inventory of unsold consoles and games, leading to price drops and retailer markdowns.
- Massive industry shakeout, with several companies folding or downsizing.
- Atari suffered significant losses and buried millions of unsold cartridges in a landfill.
- Loss of consumer confidence in the video game industry.
Long-Term Effects
Japanese Domination:
The crash shifted the dominance of the home console market from the U.S. to Japan. Japanese companies like Nintendo and Sega took advantage of the weakened U.S. market and introduced successful consoles like the Nintendo Entertainment System (NES).
Control of Third-Party Development:
Nintendo implemented strict licensing policies for the NES, including lockout chips, to prevent unlicensed games and combat software piracy. This approach became standard in the industry, giving console manufacturers more control over software development.
Growth of Computer Games:
With waning console interest, the computer game market flourished. Developers shifted their focus to computer games, and new companies emerged to cater to the growing demand.
Impact on the European Market:
The crash had less of an impact on Europe, where microcomputers dominated the home video game market. Consoles did not regain a significant position until the release of the NES and Sega Master System in the late 1980s.
Lessons Learned and Legacy
The industry learned valuable lessons from the crash, such as the importance of avoiding market saturation, maintaining quality control, and adapting to changing consumer preferences. Today, the video game industry is a global powerhouse, and the legacy of the 1983 crash serves as a reminder of the challenges and opportunities that have shaped its evolution.