Even though Atari had been making coin-op video games for 3 years, the industry itself was at a crossroads in 1975. The average video game was only making about $43 a week, which was far less than a pool table could make in the same period, and much less than the first Pong machines made.xcviii Amusement operators were getting nervous, and Atari decided to try its hand at an age-old staple of the arcade: the pinball machine.
“I got in because I felt there was a market for a novelty pinball. There was a lot of innovation that pinball needed and in those days in the coin-op world you really wanted to be a full-service supplier. There were places that just wanted pinball, period. We knew that we had such a large market-share of video, so we felt that it would make sense to do pinball.”xcix - Nolan Bushnell
Two more pinball machines were released in 1977 -- Time 2000 in September, and Airborne Avenger in October. Airborne Avenger had a playfield designed by Steve Ritchie, who would go on to design the legendary Black Knight for Williams, and was programmed by Eugene Jarvis (creator of the Defender and Stargate video games for Williams).
One of the more interesting ideas spawned by the engineer entertainers of Bushnell’s Atari was The Chuck E. Cheese's Pizza Time Theater. The idea was spawned in about 1974 when Atari was having trouble getting games placed in the limited arcade space of the day. In an attempt to appeal to families, Atari came up with the idea of a pizza restaurant with animatronic animals, and as large an arcade as they could build. While families waited for their pizza, they could play Atari’s video games. The concept took a very long time to establish into an actual business. It was not until May 16th, 1977 that the first Pizza Time Theater made its debut in San Jose.
“The grand opening on May 16th was a great success. Mayor Janet Gray Hayes, together with many other prominent people from the community and the press, came to welcome Chuck E. Cheese and the Pizza Time Theatre to San Jose. This new concept in family entertainment is another amusement innovation from Atari.” - Coin Connection, June 1977
The restaurant was filled with animatronic figures developed originally at the Grass Valley Think Tank. Besides Chuck E Cheese, they created Crusty the Cat, Jasper T. Jowels the singing dog, Pasqually the Italian chef, and a team of three singing magpies known as the Warblettes.
The brass at Warner Communications looked the other way over Chuck E. Cheese because it kept Bushnell busy as they went about discovering all the ins and out of the new company they had acquired.
“They sort of tolerated it but they figured it was going to be something that would go away. They didn’t understand it.” civ - Nolan Bushnell