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