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Atari: The Golden Years -- A History, 1978-1981

August 21, 2008 Article Start Previous Page 6 of 20 Next

1978: Atari Electronics and Pinball

Atari's pinball division continued to produce games through 1978. The first was Middle Earth in February. It included a double playfield with sets of flippers and a theme based on Lord of the Rings. Also released in 1978 was the largest pinball machine ever made (83" tall x 39" wide x 93" deep). Hercules in April 1978, and Space Riders in November 1978.

At the same time the Atari Electronics division released its first product, Touch-Me, which was a version of the arcade game of the same name that was similar to well-known toy inventor and patent defender Ralph Baer's Simon game at Milton Bradley.

"(I did) a little product called Touch-Me, which was a hand-held version of Milton Bradley's Simon, which was Milton Bradley's version of Atari's coin-op Touch-Me." lii

- Dennis Koble

Touch-Me was not a huge success, and the Electronics Division never released another product. Three other products were created in 1978, but never sold: handheld versions of Space Invaders and Breakout, plus Pro Coach Football.

1978: Bushnell Leaves

As 1978 continued, Ray Kassar's involvement in Atari moved from mere consultant into a much larger role. As Ray's importance grew -- and confidence in his abilities increased within Warner brass such as Manny Gerard -- Nolan Bushnell and Joe Keenan were systematically pushed out of the company.

"By the time I got to Atari (in the summer if 1978), Nolan was just being phased out by Ray Kassar." liii

- Rob Fulop

Bushnell constantly fought with Warner Communications and Kassar over the direction of Atari. By the end of 1978, Bushnell was convinced that Atari was making huge mistakes. He felt that the VCS was in trouble, and needed to be scrapped for a successor.

"The day that we shipped the 2600, I felt we needed to spend engineering money on getting the next one. By the time it was there, the technology had advanced so much that we could build a much better video game. Warner was horrified by the idea. They wanted to be in the 45 rpm record business and just sell records for ever, and I told them, 'It doesn't work that way, every two to three years you need to upgrade your hardware', and their decision to not upgrade the hardware was really what led to the collapse of the business in 1982."

- Nolan Bushnell

He also felt that the incipient Atari computer line needed to embrace outside developers, but the record company execs from Warner -- who were used to completely controlling IP and the delivery medium for it -- wanted to make the new computers completely closed to outside developers.

"I felt that the computer system should not be a closed system, we needed to have third party software developers. I could see Steve Jobs out evangelizing, and Atari was saying that if you write software for the Atari computers, we will sue you. I just thought that was foolhardy. They were from the record world, where you sue people."

- Nolan Bushnell

Bushnell also continued to fight with Warner over R&D, especially his plan to tie up all the N-Channel chip fabricators with alternative Atari designs, so no competitors could get their products manufactured. They also argued over the premium prices Atari put on pinball machines.

History would prove Bushnell correct on all accounts except for the fate of the VCS, and this became his Achilles heel to his superiors. In November 1978, Bushnell laid his feelings bare about the fate of the VCS during a meeting at Warner headquarters in New York City. Atari had manufactured 800,000 units for 1978, but many remained unsold. liv It looked like dire straits for all involved, including Bushnell and Manny Gerard.

"The meeting -- Warner's annual budget meeting -- took place in November. It proved to be Bushnell's downfall. Before a crowd of high-level executives, Bushnell and Gerard locked horns, screaming at each other for hours." lv

- Steve Bloom

The pair fought about all their outstanding issues, especially the still-poor sales of the VCS.

""It was a very bad year for the company. Clearly we built too many units, which translated into potential disaster. We're talking $40 million worth of inventory that the company was stuck with." lvi

- Joe Keenan

Bushnell was convinced that VCS would have a disastrous Christmas season. Gerard was confident that Kassar's marketing plans would show good results. The meeting turned into a complete disaster, and all involved knew that some kind of change had to be made.

The one thing that could have saved Bushnell was if his prediction for terrible VCS sales had come true. However, it never materialized. The success of Space Invaders in the arcades, plus the unprecedented Kassar-initiated TV marketing blitz for the VCS in the fourth quarter of 1978, meant respectable sales for the Christmas 1978 season, and $200 million for the consumer division in fiscal 1978-1979. Bushnell was very much part of that success.

"Don't forget, I also hired Ray (Kassar). If there was a problem with marketing, as Warner claims, I solved that problem by hiring Ray." lvii

- Nolan Bushnell

However, his prediction of the VCS's failure was his Bushnell's undoing. Manny Gerard suggested a reorganization that would have kept Bushnell at Atari as director, but Bushnell realized that he could never really effectively control his company again.

"I realized no matter what the title was, the real shots were going to be called from New York." " lviii

- Nolan Bushnell

Instead, Bushnell informed Gerard that he wanted to be fired (Warner contended that it fired Bushnell, but the end result was the same) and thus ended the role of the first engineer entertainer in the business of the world's first video game company.

Bushnell signed a seven year non-compete agreement, negotiated for the rights to Chuck E Cheese Pizza Time Theater from his former company (for $500,000 lix), and then set off to try to conquer the world in other avenues.

"You can spend your life doing woulda, shoulda, coulda. I wish I hadn't sold to Warner, because I think that the world would be a very different place with Atari being the preeminent video game company today." lx

- Nolan Bushnell

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Clay Cowgill
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Mr. Fulton-- you officially owe me about an hour and a half of my workday!

Thanks for the great article, although I must say that I find the claim that the VIC-20 was more powerful than an Atari 400 a bit tough to swallow... ;-)


Steve Fulton
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Thanks. That probably should read "arguably more powerful" or "perceived as more powerful". In retrospect, it wasn't.


Bruce Atkinson
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The Vic-20 had a real keyboard and similar processor. It didn't have the memory, graphics chips, or operating system that the 400 and 800 had. The Atari OS was much better than most people give it credit it for. It was general purpose with loadable device drivers, before most other home computers had that.

John Abbe
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I couldn't stop myself from reading this through either. And i'm so glad i did, because i'm pretty sure i played that game Nightmare that GCC made for Atari, at 1001 Plays in Cambridge - it was a *great* game, which i tried to find again for years. Too bad they never released it, i've e-mailed GCC to see if i can contact any of the developers to see if they have ROMs for MAME. I also updated their Wikipedia page, and referenced this article.

Thomas Djafari
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Great article!

Having worked at Time Warner, back in the SF Rush / Rise of the Robots era, I totally recognize the pattern that has also poisoned most large developers :)

Jason Cumming
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Enjoyed the article immensely.

Sorry to be a pingeek but I think there's a misplaced comma: Superman the pinball, more like 3500-5000 units sold according to the ipdb. 10 K sales from the late 70's on was blockbuster.

Mark Delfs
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This is another fantastic article--it felt as though I was there (We used our neighbor's 2600 because my parents wouldn't buy us one!) for the whole thing based on what you are reliving. Excellent, and please keep them coming!

Simon Carless
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We've fixed the misplaced comma on Superman pinball sales, thanks Jason.

shayne johnson
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Atari was not the first console to have Baseball

Channel F's Videocart 12 was baseball, released in 1977.

Steve Fulton
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Good catch, but I believe it says that it was the first "single player" baseball game. I believe the Fairchild game (which I played many times at my friend's house BTW...but my favorite game was Alien Invasion) required two-players. I was trying to highlight the A.I. of the VCS game.


Tomasz Primke
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We'd like to translate a decent articles "The History of Atari: 1971-1977" (
9711977.php?page=1) and "Atari: The Golden Years -- A History, 1978-1981" (
__a_.php) into Polish language and publish it on a popular portal (and/or Do you mind us doing so? Obviously proper attribution would be paid to you as the author.

Please let us know what you think about such re-publication. (My e-mail address is tprimke_at_gmail_dot_com.)

Best regards,


dz jay
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Your information regarding the Intellivision is not accurate. The Intellivision was not powered by a 10-bit processor, but by an early 16-bit processor. It did, however, performed 10-bit memory addressing, but this was due to the fact that the ROM chips it used were 10-bit. This happens to be purely an accident of history: a 16-bit microprocessor designed in an 8-bit and 10-bit world.

Moreover, it is very unlikely that the Atari 3200 was to be based on the same chipset as the Intellivision. The Intellivision was mostly a knee-jerk reaction to the Atari 2600 from Mattel, and therefore consisted of an pre-built, off-the-shelf game system created by chip maker General Instruments. In fact, it was an actual sku item on their 1978 parts catalog. It was later customized a little, mainly to allow for more ROM and custom graphic tiles, but it was generally an off-the-shelf product.

Therefore it seems unlikely that Atari would plan to replace their aging custom-designed Atari 2600 with an off-the-shelf product, whose technology, although having some more capabilities, was just as old.


Steve Fulton
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Thanks for that!

I'd say that from your description, the Intellivision processor could have still been one of the chips that Bushnell had tied-up in development, especially if GI was one of the companies he used. Remember, the idea that the Intellivision was based on one of those processors did not come from myself, but from a direct quote that Bushnell gave to me in an interview. Still, it's a very gray area and this why that part of the story is painted as "not definite".


dz jay
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Mr. Fulton,

Thanks for your response. You are right, the GI microprocessor could still have been the planned successor to the Atari 2600. However, I still think it unlikely due its many limitations (weird architecture, 10-bit memory addressing, etc.).

My point was that the only reason Mattel used it was not because it was considerably better, but because they needed a quick release, and chose the General Instrument's pre-built system in haste in order to jump into the new Video Game market.

The entire Intellivision console was indeed superior, with better graphics resolution and 3-channel DSP'ed sound (although the graphics were tile-based instead of pixel-based, limiting its practicality; not to mention the ill-conceived Disc Controller!), but its microprocessor and chip technology were the products of early 1970s technology, hardly state-of-the-art; and unlikely the first choice for a successor.

But, of course, we can't ever know, and I do concede it's possible.

I do agree that competition from Mattel could have been avoided if only Atari had adhered to Bushnell's strategy.

All in all, a very interesting and satisfying article; one that brought back wonderful memories. Please keep up with the thoughtful historical accounts of our wonderful technological roots.

Thank you,


P.S. Why, yes, I did (and currently) own a Mattel Intellivision, thank you.

dz jay
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P.P.S. My intention in the last comment was not to refute your assertions; I find your article very well written and accurate, and I enjoyed it immensely. I just wanted to enrich your historical account with further information from one of the little remembered competitors of the time.

Perhaps Gamasutra can showcase the Mattel Intellivision on a future article and fulfill my well of nostalgia, as it has already done with the Atari VCS, the Commodore 64, and Video Game arcades in general.


Mason Mccuskey
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Steve - great article, I especially like all the quotes. Thank you for going into detail, and including quotes from so many insiders.

Steve Fulton
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No problem! Thanks for adding to the discussion. I agree, the Intellivision story needs to be told. I'd love to try to tackle it someday, especially since it all went down near my home town (they used to frequent the local arcade here while making games), Keith Robinson from the Blue Sky Rangers draws a cartoon for the local paper, and Intellivision Productions is in the same office building as my favorite Sunday breakfast coffee shop), I currently work for Mattel.


I'm happy you noticed. The quotes, to me, are the most important part.

Ryan Ponce
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Although my first system was the Coleco Telstar Arcade. (Google it) Which had a drag racing game. Shoot the moving man on the screen and Pong. On one triangle shaped cart.

It was Atari that really changed my life. Starting with COMBAT. My brother and I played that till the wee morning hours and although it was simplistic. I never had so much fun in my life. That would be followed by Space Invaders. Asteroids, Adventure, which was the first game that gave me the sense I could explore a world in a game. I liked the Sword Quest series as well.

Seeing a TV ad for Atari. Going to store and seeing the box art for each game. Buying a game and taking it home and opening it up. Taking the cart out and putting it into your Atari. That was pure bliss when I was growing up.

Atari is my childhood. I love Nintendo as well, but I'm not the Nintendo generation. I'm the Atari generation. Atari forever!

Thomas Djafari
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I can provide you more information about the Intellivision; I did a little bit of work with Keith Robinson and his office is pretty close to my place, so I can go talk to him again.

We re-developed 2-3 years ago Intellivision cartridges as Keith acquired the rights to unreleased games and wanted to release them for the retro crowd.

The carts are not simple ROMs, but use a time multiplexed bus for address and data, and the Intellivision hardware is definitely odd...

We've also re-developed a 2600 clone, for a product that hasn't been released (distributor problem), so I can answer a lot of questions about the 2600 hardware and some of its history if you want to do a followup.

you can contact me at: my first name that you can see on this post @

Steve Fulton
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>>Seeing a TV ad for Atari. Going to store and seeing the

>>box art for each game. Buying a game and taking it home

>>and opening it up. Taking the cart out and putting it into

>>your Atari. That was pure bliss when I was growing up.


That is exactly what I can't shake Atari from my mind. Somehow i want to recreate those moments, but it is very difficult these days.


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I have to know, is it possible to begin another era of amazing gaming with a similar gaming box? Are these "xbox" and ps/3 - whatever-s REALLY that good? I, too, cant shake Atari. The late 70s and early 80's were golden years for me with that stuff. I had a bedtime, back then, but in front of that Atari 800 I was developing games. Amazing.

Scott Stilphen
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Nice article, although one error I noticed is Lookahead was by Dave Johnson (not Bob Johnson).

Scott Stilphen
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Another error - VCS bank-switching was originally created for Video Chess, not BASIC Programming. Video Chess ultimately never used it (neither did BASIC Programming); the first game to take advantage of it was Asteroids.