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The History of Atari: 1971-1977

November 6, 2007 Article Start Previous Page 6 of 20 Next

1973: Pong Is A Smash Hit!

"As a result of Pong, a player can gain a deep intuitive understanding of the simplest Newtonian physics." xxx - Carl Sagan

By March of 1973, Pong was deemed a bona fide phenomenon for Atari. They had sold 8000 - 10000 machines, and would eventually sell upwards of 35,000. The day Pong was released is marked by the coin-op industry as the first nail in the coffin of pinball. xxxi

Atari was so successful in its first year for two reasons. First, they used an early version of a “Just-In-Time” manufacturing processes.

“With expensive parts, such as cabinets, we tried to get them out the same day they came in and we made sure that 75% of the cost turned over in less than a week." xxxii
- Nolan Bushnell

Secondly, Atari also took advantage of the soaring demand for Pong by insisting on cash payments from distributors instead of going along with the longer terms common in the coin-operated game industry. xxxiii

pong By March of 1973, Atari had made a little over $3.2 million dollars. However, there was a black side to this fortune. Atari’s patent for Pong took a long time to clear -- too long to stop a myriad of copycats from showing-up almost immediately.

“I filed for a patent, but in those days patents took 3 years to issue. I don’t think my patent issued until 1975 or 1976.” xxxiv
- Nolan Bushnell

Since the game was designed using a discreet logic TTL design, there was very little they could do to protect their intellectual property. Anyone who owned a machine could open it up, examine the circuit board, and copy it chip for chip. By the end of 1973, there were so many competitors selling Pong-style games that Atari was no longer the leading manufacturer of its own game. Some of the copies were made so well that they looked exactly like the original Atari versions.

Some of the Pong competition in 1973 included: Elepong from Taito, Davis Cup by Taito (each player had two paddles), Computer Space Ball (1972) from Nutting Associates, Hockey by Ramtek, Hockey TV from Sega, Leader from Midway (a very innovative 4-player Pong variant with a wall in the middle for deflection), Olympic Tennis from See-Fun (2 or 4 players), Pro Tennis from Williams Mfg. Co. (4 players), Paddle Battle from Allied Leisure (exact copy of Pong), Paddle-Ball from Williams (exact copy of Pong), Pong-Tron from Sega (exact copy of Pong), Pong-Tron II from Sega (exact copy of Pong), Pro Hockey from Taito, Rally from For-Play, TV Hockey from Chicago Coin (exact copy of Pong), T.V. Tennis from US Billiards (exact copy of Pong), TV Ping Pong from Chicago Coin (exact copy of Pong), Table Tennis from Nutting Associates (exact copy of Pong), Tennis Tourney from Allied Leisure (4 player Pong), Winner from Midway (an exact copy of Pong) and Winner IV from Midway.

Atari could have fought each one of these copycats -- but they could not afford to do it.

According to Nolan Bushnell

“Atari was always scrambling for cash, and we thought to spend money on attorneys was not a smart thing to do.” - Nolan Bushnell

However, it wasn’t just the copycats Atari had to worry about, it was other legal problems as well. Magnavox and Ralph Baer did not take kindly to the success of Atari’s Pong, especially since they had created a very similar game more than a year earlier. They took Atari to court, suing them over Pong. They used the sign-in-sheet for the 1972 Magnavox demo that Bushnell attended as proof that he saw the Magnavox video games before he came up with his own idea. However, Bushnell maintained that while he might have seen the Magnavox product, his was far superior:

“They did an excellent job of creating a game using analog circuitry, but it just wasn't fun.” xxxv
- Nolan Bushnell

Skillfully, Nolan Bushnell turned this legal problem into an advantage for Atari. Atari settled with Magnavox, and the case never went to court. They paid a licensing fee close to $500,000 and became the sole licensor of Pong from Magnavox.

“It was a strategic thing. Magnavox was desperate to settle with me. They had seen lab books and I had been in business for two years before the Odyssey game was supposed to hit the streets. We settled basically for an amount of money that was less than I was spending on attorney’s fees at the time. $500,000 paid over five years. Less than 1/10th of 1%. It was a usage royalty.”xxxvi - Nolan Bushnell

"As far as we were concerned, that was the end of our problems with Atari" xxxvii
- Ralph Baer

Magnavox then agreed to go after all of Atari’s competitors as part of the deal, which basically freed Atari to create new and different games while the competition was stuck in court.

“In our agreement we required that they go after all our competitors. Literally, I felt that if we could keep everyone else distracted and paying money, that could only help our business. I was not worried about Magnavox being a competitor. It was a strategic business move. Any time you can damage your competitors, walk away from it with token royalty and have everyone else sweating bullets because they knew that had copied my stuff. It was a good thing for Atari.”
- Nolan Bushnell

The final analysis of these early lawsuits shows that it really did not matter who invented “the video game”, but it did matter who made it successful.

“I didn't invent the video game -- I commercialized it.” xxxviii - Nolan Bushnell

Article Start Previous Page 6 of 20 Next

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