1975: Home Pong
At one of the Grass Valley retreats, when Atari was struggling in 1974, the subject of a home version of Pong was brought up to Nolan Bushnell by engineer Bob Brown. Fellow engineer Harold Lee and Bob Brown had been bouncing the idea around as far back as 1973, but at the time it did not amount to a serious discussion. However, with Atari on the brink of financial disaster in ‘74, the time seemed right to investigate the possibility once more. To make a home version of Pong viable required that the entire game be placed on a single microchip. Up until that point, Atari had never used microchips in its products, so it was a huge step for them to attempt to enter that arena.
“We were all young, it was the '70s, it seemed like the right thing to do.”lxix
"I got to talking about Pong with an engineer friend of mine named Harold Lee, who was working in coin-op. I really wanted to do a consumer product so I asked him whether we could put Pong on a chip. It would be a dedicated home game for TV that would essentially be like the coin-op Pong. He said it could be done, and then we sold Atari on the idea."lxviii- Bob Brown
By the fall of 1974, Al Alcorn had joined Harold Lee and Bob Brown, working on a home version of Pong, now code named “Darlene”. Discussions at the Grass Valley retreats tended to move into two directions: technology and women. It just so happened that when Home Pong was discussed, so was a particularly attractive Atari employee named Darlene. The name stuck, and so did the trend of Atari to use female names as code words for their most secret of projects.
- Nolan Bushnell
By early 1975, the success of Tank!
left Atari in a good position to start to seriously work on home Pong
. They earned $3.5 million on $39 million in sales for fiscal 1974-1975, and could afford new R&D. The cost of microchips had come down to a level that would make the project economically viable, so Atari decided it is the time to go full-bore and enter the home market. Even though Bushnell was urged by advisors to stay away from the home market (the same one that Magnavox was struggling in), he decided to do it anyway.
“The next epiphany, if you would, was when we figured out we could put
Pong on a single LSI chip... All of a sudden, we knew we could put one in every home. All of a sudden, we went from a very successful coin-op business to a potential consumer business.” lxx
- Nolan Bushnell
Alcorn, Lee and Brown worked through 1974 and into 1975 perfecting a microchip-based home Pong unit that could not be easily copied by the competition. By mid-1975, they had succeeded, but then had no idea what to do next. Atari had never marketed anything to the public before. Most of their previous marketing materials consisted of flyers sent out to amusement operators to announce their new games. Gene Lipkin, their VP of marketing, had experience in the coin-op world, but this was very new to him. What was good enough for a company based on engineering and game design that sold to a limited audience for $1,000 or more per unit would never work in the high-volume, low-margin world of consumer goods.
Atari took Home Pong
to industry trade shows like the New York Toy Fair, directly to toy stores, and offered it to various departments at Sears (toys, appliances) but all refused. The only person even remotely interested was Tom Quinn, who managed the buying for the the Sporting Goods department at Sears. He initially ordered 50,000 units which increased to 150,000 by Christmas. It was the perfect way to start. If any company had experience in consumer goods it was Sears and Roebuck, then the largest consumer goods retailer in the country.
Aside from a lack of marketing experience, Atari also had no experience manufacturing consumer goods in the amount required to service a huge account like Sears. New facilities had to be created, processes put in place, employees and hired. To make their Sears quota Bushnell enlisted the aid of Donald Valentine to help secure venture capital for Atari. He came through with $600,000 in the summer of 1975, and another $300,000 in December, which was enough to help get the home Pong
The home Pong
unit (sold under the Sears Tele-Games label) was a huge seller in the Christmas 1975 season. The gamble paid off -- Atari was now a technology leader in two separate markets, arcade and home, something no one had ever done before.
“We risked the company every year on new ideas. We were young and if it failed we could always get jobs in Silicon Valley”lxxi
- Al Alcorn