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The California Dream of gold dust, celluloid, and silicon has a magnetic pull. Mystics and capitalists of every stripe find themselves drawn to the San Francisco Bay Area, where they often meet with astonishing success or spectacular defeat. Frequently both.
Atari Is Go
As a student at the University of Utah in the mid-1960s, Nolan Bushnell spent his time studying philosophy and the FORTRAN programming language. His downtime was spent immersed in Spacewar! battles on the school's mainframe. During summer he worked the midway at a local amusement park learning how to entice players into "just one more try" at the games.
After graduating, Bushnell moved to the Bay Area to take a job at the Ampex Corporation. In his off hours he began work on a version of Spacewar! that would run on low-cost components rather than the exotic computers on which it had been designed. In 1971 he partnered with Ted Dabney to form Syzygy Engineering and the two created the Computer Space arcade machine for Nutting Associates. Unfortunately, while the game was popular with college students, the complicated controls made it a hard sell at working-class pubs.
Despite the failure of Computer Space, Bushnell and Dabney incorporated Atari in 1972. The first developer hired at Atari was Al Alcorn who quickly set to work on Pong, completing the first version of the game in less than two weeks. When the location test machine broke down within a day because it had been jammed with too many quarters, they knew things were going to happen quickly for Atari.
Following the success of Pong, the arcade scene began to bloom not only for Atari, but also for its competitors. After a string of coin-op titles including Quadrapong, Space Race, and Gran Track 10, as well as the Kee Games-distributed Tank, Atari created a home version of Pong in 1975.
Encouraged by the success of the home Pong console, Atari began work on a far more ambitious cartridge-based machine named Stella. Principally designed by an Atari-owned firm called Cyan Engineering along with assistance from Jay Miner and Joe Decuir (who would later help design the Amiga for Commodore), Stella was released in 1977 as the Video Computer System, also commonly known as the Atari 2600.
Getting the VCS to market was a costly endeavor for Atari and in order to keep on solid financial ground Bushnell sold the company to Warner Communications with Bushnell remaining as chairman. Despite a slow start, the console soon found favor with consumers and would go on to sell more than 25 million units over its 14-year lifespan.
During its formative years Atari had the reputation for being a somewhat loosely run operation were it would not be unusual to see business meetings conducted through a haze of joints and beer. However, with millions of dollars pouring in from the VCS as well as its thriving arcade business, Atari under Warner became a much more stable and corporate environment. The relationship between Warner and Bushnell began to sour, and by 1978 he was removed from the company's board. As for Bushnell, he was already looking toward a far more lucrative world where cheap pizza and animatronics beckoned.
The Gang of Four
While Warner's steady hand kept the wheels of commerce turning for Atari, the developers who were creating million-selling games for the company began to wonder why they were still being paid starvation wages.
Initially a group of Atari programmers, including David Crane, Alan Miller, Larry Kaplan, and Bob Whitehead approached the company with a proposal for a standard contract that would give creators design credits and royalties on the games they developed. Dismissed by management, the Gang of Four left Atari and took the bold step of forming Activision in 1979, the first independent development and publishing company for home consoles.
Despite Atari's attempts to derail Activision with lawsuits, the company brought its first games Dragster, Fishing Derby, Checkers, and Boxing to market in 1980. Activision was soon riding high on the crest of the VCS wave. Standout games included Crane's Grand Prix and Pitfall, Kaplan's Kaboom!, Whitehead's Chopper Command, Miller's Starmaster, Steve Cartwright's Barnstorming, and Carol Shaw's River Raid.
It was a golden time for the VCS with Atari, Activision, and a host of smaller companies reaping huge profits from the console's popularity. However, by 1983 the ride was coming to an end. Costly duds like E.T., a poor port of Pac-Man, and a profusion of shovelware from fly-by-night publishers had done much to erode consumer confidence in the VCS. Atari's next-generation machine, the 5200, was introduced in 1982 but struggled to gain a foothold, and was poorly supported by the company. With nothing compelling on the horizon, players began to lose interest, and sales dropped.
What should have been a short-term contraction of the market quickly spiraled into a complete meltdown as smaller publishers went out of business, leaving retailers with unsold cartridges. Unable to return the carts, retailers tossed them into deeply discounted bargain bins where they were in competition with full-priced offerings from Atari and Activision. Feeling the Christmas crunch, shoppers turned to the bargain bins for their games, driving the sales of new titles into the ground.
The crash was devastating to both companies' profits. Warner wanted out, and in 1984 the company was sold off to Commodore founder Jack Tramiel. Activision soldiered on, although its founders had all left by 1986. The company diversified into PC games and productivity software over the next several years but the damage from the crash exacerbated by bad management was too great to overcome. In 1991 Robert Kotick bought the company, restructured, and moved it Los Angeles.