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

August 21, 2008 Article Start Previous Page 2 of 20 Next


As 1978 started, Atari was having trouble on several fronts. While the VCS had sold well during Christmas 1977 (upwards of 350,000 - 400,000 units), sales were stunted because of production problems that had the VCS units delivered late to retailers, resulting in a $25 million dollar loss for the period. vi

Atari was also hobbled with warehouses filled with unsold dedicated Pong units, the stagnation of the coin-op business, and an increasing divide between Warner brass and existing Atari management.

Even so, Bushnell was positive that, with the VCS, Atari had a winner on its hands. It just needed to find enough talent to make games for the system.

"I see us as having built a record player and now it's up to our creative people to decide how many records there will be." vii

- Nolan Bushnell

In his mind, if he could make it work, the sky would be the limit for Atari's game system. The profit potential for a system like the VCS was one of Bushnell's crowning achievements for Atari.

"The thought of taking something that cost $3 and selling it for $20, or selling it for $40, I take great pride in that as a concept." viii

- Nolan Bushnell

At the same time, Bushnell found himself butting heads with Warner's executive VP, Manny Gerard. Bushnell and Joe Keenan disappeared from Atari for some time after the VCS was released, but popped back in at times to give their opinions on the business. This frustrated Gerard.

"You can't disappear and walk in six months later and say 'let's do this.'" ix

- Manny Gerard

Also, Gerard was positive that Atari was spending far too much effort on engineering and R&D and not enough time trying to sell and market its products.

"They had no sales, no advertising, no marketing, nothing but R&D." x

- Manny Gerard

"We had a very powerful engineering team working on a lot of projects -- a lot more than Manny thought we should have." xi

- Nolan Bushnell

In February 1978, Manny Gerard encouraged Bushnell to find some help marketing Atari's products. When Bushnell was slow to respond, Gerard suggested Harvard educated Ray Kassar, an ex-marketing VP from Burlington textiles. Kassar was exactly the button-down, straight-laced businessman that Bushnell was not. Kassar began as a consultant, with his directive from Warner to find out if Atari should be dumped altogether. What he found was not encouraging.

"It was a disaster." xii

- Ray Kassar

However, Kassar was impressed with one thing at Atari: the VCS xiii. Instead of recommending liquidation to Warner, he set out to develop an integrated marketing plan that would save Atari.

At the same time, Bushnell and president Joe Keenan found themselves struggling to hold on to the company that they had created. Instead of leading Atari in new directions that would build the business even further, Bushnell was constantly clashing with Manny Gerard and Ray Kassar over the future of Atari's products and especially R&D.

"Where we became unglued was when Manny started killing the research projects. I saw that as building a very fragile company." xiv

- Nolan Bushnell

Article Start Previous Page 2 of 20 Next

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