Home Gaming Community submission: Are we headed for another industry crash?

Community submission: Are we headed for another industry crash?

11 min read



By Daniel Keevy

The period in North America from 1983-1985 is commonly referred to as the ‘North American Video Game Crash.’ While gaming had experienced crashes before, such as the 1977 crash caused by too many Pong clones, the 1983 crash stands above the previous and subsequent crashes.

Responsible for the rise of the third generation of gaming and the rise of Japan as the preeminent designers of videogames; the ultimate result of the crash was the dissolution of Atari, the rise of patent and copyright and the establishment of computer gaming. Can we determine whether this crash could possibly happen again, by examining the root causes of the crash and applying them to the modern-day industry?

The 1983 crash was felt only in the console industry; PC gaming actually benefited from the crash. This was, however, in an era where console gaming and pc gaming had separate developers. In the modern day paradigm very few publishers and developers only focus on a single aspect of the market. The modern-day equivalent of PC gaming (in the 80’s) would be independent developers and those unwilling or unable to work with the massive publishing houses.


Briefly, it can be argued that the 1983 crash was mostly caused by Atari and that the crash was focused solely on console gaming. The foundation for the crash was the Atari 2600 which also has the unique distinction of being the cornerstone of console gaming. Released in 1977, the 2600 was worth around $ 2 Billion in 1982. Succeeding because Atari quickly purchased the licenses for successful franchises as well as allowed for the use of pre-programmed cartridges, the 2600 became the face of gaming in the 1980’s to the point where Atari was synonymous with the entire industry.

However, the entire ecosystem was unsustainable. While every big franchise was throwing wads of cash at Atari to develop games for their license, Atari itself was collapsing under the weight of all that business. The best example of this, as many older gamers can attest, was E.T for the Atari. Created in less than a year, in 1982, E.T was rushed through because the Hollywood studio controlling the license demanded the game be released by the Christmas rush. While it cannot be said that this disaster was the sole cause of the crash, it illustrated all the issues facing console gaming at the time.


Released in the 1982 holiday season, E.T was considered one of the most anticipated games of the year; Newsweek went so far as to proclaim the acquisition of film rights a “massive coup of Atari” and speculated that the rise of film licensed video games would add even more revenue into the market. While many copies of the game were ordered by distributors, several distributors cancelled their orders and Atari themselves cancelled several orders with retailers due to exclusivity contracts. This created an untenable situation where Atari expected impressive profit while not properly accounting for the economic downturn. This created a situation whereby Atari had inventory of around 4 million cartridges, while only selling around 1.5 million cartridges. While the game was a failure among critics, it is difficult to determine how much of an impact this had on the economic failure. A well-known urban legend is that Atari crushed and buried the unsold copies of E.T in a landfill located somewhere in New Mexico, USA.

The failure to launch by E.T illustrates two of the main causes of the 1983 crash; high profile failures and a lack of publisher control and oversight. E.T was released before the game was properly tested, because the organisations bankrolling the project insisted it be ready for the holidays. The final cause was flooding of the market. While the Atari 2600 was the cornerstone of console gaming and the leading light in the 2nd generation, there was a saturation of other consoles, such as the Bally Astrocade, ColecoVision, Coleco Gemini, Fairchild F System, Mattel Intellivision and the Atari 5200. These were joined by the Odyssey 3 and the Atari 7800 in 1984. All these consoles had an extensive library of games, as well as several 3rd party developers. The market was completely flooded, not only with proper launch titles but also several failures and many unsold copies of games. Pac-Man was available on all these consoles, but the Atari Pac-Man was a piss-poor port of the arcade classic with glaring colours and broken gameplay.

All this created an indefensible economic position. When retailers and distributors attempted to return unsold copies of games and unsold consoles they were informed that both the game publishers and the console developers did not have the necessary funds available to refund them for their purchases. This had a two-pronged effect; firstly distributors and retailers ordered far less stock from the gaming companies leading to a higher stockpile, and it forced the retailers to sell the games for as little as possible in order to recoup sales. It resulted in several companies withdrawing their intellectual property and many to abandon the industry completely. The only notable survivor of this crash was Activision, who only survived because they migrated to the PC market and had savvy accountants who exploited several tax loopholes.

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Last Updated: April 2, 2013

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  1. AndriyP

    April 2, 2013 at 12:42


    No need to substantiate that answer, one just has to go to a store and count the games
    There are way more sequels than new games


  2. Admiral Chief Erwin

    April 2, 2013 at 12:42

    I dunno, I really, honestly, don’t know. I also don’t know if a crash will be a good / bad thing.


    • OVG

      April 2, 2013 at 13:10

      Just get Dead Space 3, Hitman, Max Payne3, Tom Raider and the like while you can, because the work model of polish and high budgets have failed.


  3. OVG

    April 2, 2013 at 12:52

    140million consoles and AAA Games cant catch 3% of that market to make profit.
    RE6, DS3, HITMAN, MP3…..Tomb Raider 🙁

    John Riccitiello and Wada are the first to go. They should have just made cheap games like Dark Souls that only sold 750 000 and made mega profit.

    So cheap games is the future unless its ROCKSTAR, because gamers vote with their wallets and the stats show.



    • OVG

      April 2, 2013 at 13:38

      I understand that out of those 140million consoles half are broken, shared houses or for the casual crowd. So lets say 50miliion…10% still sounds shit for market share.
      Remember that it took 3 years for todays consoles to hit that number.

      So I hope the game developers for next gen dont expect 5miilion sales and 60million on marketing costs while the next gen is going to be 10% more expensive to make games.

      Baffles my mind


      • Jim Lenoir (Banana Jim)

        April 2, 2013 at 13:49

        lol, if your game is running above 200 million in total costs (from R&D and marketting), and you’re yet to sell anything… you’re DOING IT WRONG!


  4. Sir Captain Rincethis

    April 2, 2013 at 12:54

    Well put together piece here. Agree, we are DOOOOOOMED.


  5. AndriyP

    April 2, 2013 at 13:03

    Im feeling particularly ranty today…

    Games are made and then chopped into to pieces and charged separately as DLC


    Game are made that are very bad in quality with constant updates that sometimes take months to actually play a working game


    The figures that are being “invested” into the games are absurd thats why their sales targets are absurd

    And it still doesn’t make sense for games to cost so much money to make because most of the games are SEQUELS!!


    No new ideas, the lack of innovation is appalling im just tired of same type of games the past few years

    if you have played Assassins creed 1 you dont need to play the rest there wont be anything new thats worth the cost of the game
    if you played COD theres nothing new that comes up in the latter CODDDDSSSS that are worth the cost of the game

    What happened to gripping stories?
    Deus Ex was the last game that really amazed me with the story from the last 4 years

    Theres just too many issues and when combined makes me want the damn crash to come so that a new era can begin from the start of gaming so that one day my kids will have great memories of things they experienced when they grow up because of one of the best forms of entertainment that was once alive..


    • OVG

      April 2, 2013 at 13:21



      • AndriyP

        April 2, 2013 at 13:23

        Funny enough i did think about crash bandicoot just now

        sigh that was freaking fun


  6. Jim Lenoir (Banana Jim)

    April 2, 2013 at 13:07

    The Crash… it comes!

    I agree with the OP, I don’t think a new videogame crash would destroy gaming, I actually see it as beneficial (if it came to pass). In Cape Town, the life-cycle of fynbos depends on the destruction of the old and the dead by fire. The fire also stimulates seeds to germinate. There’s no denying, that the industry is in a creative funk at the moment. We’ve seen games in the last few years that should have blown us away (especially triple A titles), yet instead, failed to deliver. Just think of Dragon Age 2, Mass Effect 3, even Erwin’s favourite, Skyrim. Recent releases that should have been spectacular, but instead found themselves sucking the nipple of failure or even mediocrity, includes, the new ALiens game (an example of failure supreme) or the latest Gears of War game (and example of soul-destroying mediocrity wrapped in stained toilet paper)

    And then there’s the annualised titles, who are slowly strangling the creative life blood out of the industry… (the Call of Duty games… the AssCreeds).


    • Aussious

      April 2, 2013 at 17:23

      Come now James I get you calling Dragon Age 2 a farce but, Mass Effect 3 and Skyrim might have some flaws but they are hardly examples of gaming mediocrity with games like Aliens and the recent Walking Dead games being made. Give credit where credit is due James…


      • Daniel Keevy

        April 3, 2013 at 01:05

        Yeah, the quality is definitely there on some of the products.

        That’s the insanely frustrating point. It’s not always the quality that’s limiting sales, it’s how business is done.


      • Jim Lenoir (Banana Jim)

        April 3, 2013 at 05:54

        Both Mass Effect 3 and Skyrim weren’t as polished as they should have been. That was really my point. Forget the Skyrim-PS3 drama, even on PC and xbox, once you gave it a decent amount of play-through the glaring issues became even more so.

        But crucially, If you compared Mass Effect 3 to Mass Effect 2, in terms of quality, standards did drop, and that’s really the gist of my arguments. I enjoyed ME3’s MP, but from a purely critical standpoint, ME3 paled in comparison to the second game (instead of improving on it and the first). Gears of War did the same thing. The first game is still the one to beat in my book, with subsequent titles actually missing the mark. Uncharted is another, while I enjoyed the third game, if you compare it to the second, something was definitely lost along the way.

        Now, I concede that “quality” is subjective in this sense, and you could ask, what do I consider “quality”? It really boils down to a few things. I look at “asset reuse” (copy and paste), I consider “characterisation” (are characters growing or remaining stagnant) which also ties into the general story of the game. For instance, is it improving the mythos or are we merely being strung along per title, in a never-ending cash-grab (i.e AssCreed). I could go on, but it’s 6 in the morning, and I haven’t had coffee yet, and one of the cats just vomitted up a hairball… 😛


    • Daniel Keevy

      April 3, 2013 at 01:00

      Yeah, there’s a definite trend. I also think it’s because Triple A titles are coming thick and fast. On my budget I can buy two Triple A games a year. So I can’t splurge on every game. And neither can most people.

      Sadly, many publishers haven’t adjusted for this model, preferring to opt for the pre-order model.


  7. caponeil

    April 2, 2013 at 13:07

    Gaming is a tight spot because of the following:

    – COD, FIFA paving the way for other clones trying to cash in with deteriorating quality (RE6)
    – Not enough support for fresh IP’s (Steam is doing some good work but it is a drop in the ocean)
    – Reliance on AAA titles for the bulk of the money printing
    – Piracy! (I really do feel that that is one of the reasons that titles are so ridiculously expensive) – Don’t get me started on this! (Diablo, Simcity, online-only) Dafuq!
    – Lawmakers closing down certain regions becasue of religion, violence, propaganda etc. Need more freedom
    – Justin Bieber


    • Jim Lenoir (Banana Jim)

      April 2, 2013 at 13:08

      Bieber is the reason North Korea declared war on South Korea… He is the Anti-Nice!


      • Twakkie

        April 2, 2013 at 14:04

        Lol, read this on FB this morning: “First South Korea went viral with Gangnam style. Then North Korea went nuclear with Pyongyang style.”


  8. OVG

    April 2, 2013 at 13:12

    Its all up to Bioshock 3s sales to prove if gamers know what they want.


  9. matthurstrsa

    April 2, 2013 at 13:18

    I don’t see a massive crash coming like it did in 1983. Publishers/developers are in a much better financial position and most don’t rely only on one IP. Sure, some companies (like THQ) will fail, but that’s bound to happen in a free market.


  10. Slade Boender

    April 2, 2013 at 13:19

    I vote fuck the machine. Let it burn.


  11. Anon A Mouse

    April 2, 2013 at 13:21

    The burial of the E.T cartridges is not an Urban Legend, it actually did happen. Brick and mortar sales of games have been steadily declining of the last couple of years but online content have been increasing rapidly. I wish a crash will come in order for the industry to go back to basic and start getting the basics correct from day one. However I don’t think there will be a crash like that, certain players will leave the industry while those left behind will shift their focus to digital downloads (I hope I’m wrong on this one.) I think the industry is too bloated as it is at the moment and it will see a bit of it’s flabbiness fall off but if that’s going to be a good thing for the consumer I don’t know. It might be a two bladed sword. Better quality games but at a much higher price because of less competition, or heaven forbid, crappier games at higher prices because of less competition.


    • Jim Lenoir (Banana Jim)

      April 2, 2013 at 13:22

      Let it burn, that’s what I say…


    • Marty Goldberg

      April 2, 2013 at 17:53

      No, it did not happen. The burial in New Mexico was overstock from the changing of the Texas plant. We have the full story in the book “Atari Inc. – Business Is fun.”


      • Daniel Keevy

        April 3, 2013 at 20:13

        I always thought it did, but I found a reference to your book kinda explaining what happened. It’s incredible to think that times could be that desperate.


  12. Sir Rants-a-Lot Llew

    April 2, 2013 at 13:27

    Bravo dude! Bravo!

    *Starts a slow clap*


  13. silverscorpio

    April 2, 2013 at 14:57

    I think a crash is coming but not just yet. The upcoming PS4 and Xbox will stimulate the industry again but after that it may happen. The signs are there and the biggest problem facing the industry is the Publishers themselves. They are milking FPS titles at the moment and not innovating. I agree that Indie studios is going to survive but developers linked to Publishers are in for a hard time. THQ was just the beginning. Activision and EA will probably not survive a crash as they are the most guilty parties with Ubisoft not far behind when it comes to alienating their clients. These Publishers are banking on titles bringing in quick returns after launch and with game prices going the way they are people wont be able to afford a lot of releases a month. They will make their money during the year after launch but they cannot affors to wait, Look at Square and EA firing their CEO’s because titles did not make enough money after launch. It is clear that they are panicking.

    The biggest problem that Publishers are facing is that they do not understand their clients. They will get a franchise that is brilliant and milk it with annual releases until people are fed up with it.The only thing they change is a texture here and there. Then they blame piracy and used games and go to the next franchise.

    Irrational did everything right in my opinion with Bioshock Infinite. They took their time and gave a quality product that is fun to play. Even the hipe was done right. 2K clearly did not interfere with the development process and money was not wasted on a useless multiplayer.

    Now Ubisoft is going to for annual releases of Assassins Creed and maybe Far Cry as well. They are going to exhaust the franchises and who do they blame, Piracy and Used Games. It would have been better to release Assassins Creed one year and the next year release Far Cry. That might be better because they can take their time and give a good product. At the moment Assassins Creed does not even feel like Assassins Creed. It feels like GTA set in the past.

    Here is how I see the future of gaming after a crash. Mega Publishers are going to be a thing of the past. Developers will get funding from crowd sourcing like Kickstarter and then they will self publish on a digital service like steam or the PSN store. They consumer will have a lot more say about thing like DRM and other unwanted unfriendly things like always on internet requirement because they are giving the initial funding. Digital distribution houses will become a new version of publishers but with very little say in the end product. The Developers will be king again and the publishers will remain a means to an end and not the other way around as what is happening now. In other word you will see Mega Developer companies and not Mega Publishers.


  14. Aussious

    April 2, 2013 at 17:17

    What concerns me the most is the rate at which game studios are being closed, a sad side effect of capitalism perhaps? The buck stops with us the gaming consumers as long as we keep supporting safe recycled so called AAA games the industry will continue to suffer we vote with our wallets.


  15. W_TF

    April 2, 2013 at 21:51

    Fuck the new games. After the disappointing piece of horse-shit that is Hitman: Absolution, I’m gonna just stick with playing my old offline games. Frankly: I don’t trust the gaming industry to produce anything that isn’t crud any more. Bring on the crash!!!


  16. Willem Swanepoel

    April 3, 2013 at 05:28

    The crash is coming, I hope it comes. It is the only way they will listen because our complaints are hitting brick walls.

    I will feel sorry for all those developers who will lose their jobs but unfortunately the gaming industry needs the crash….

    It will pick itself up again but it will be for the greater good.


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