Atari’s Bad E.T. Game Wasn’t Responsible For The 1983 Video Game Crash, Capitalism Was

Atari’s Bad E.T. Game Wasn’t Responsible For The 1983 Video Game Crash, Capitalism Was
Image: Universal Pictures / Kotaku

History is the study of literally everything that has ever happened, and by that measure, it is objectively the most interesting of all fields. It’s also just totally, categorically wrong, like, 90 per cent of the time. Case in point: You’ve probably heard that E.T. for the Atari 2600 was so bad that it crashed the video game industry. Turns out, that’s not what happened — at least, not exactly. On this week’s Splitscreen podcast, we deep dive into the landfill that is licensed games’ history as well as their future, which sure is starting to look like Hollywood’s present.

For our first segment, Ashley Parrish, Michael Fahey, and I scour the history books to uncover the story of how the licensed game E.T. nearly (didn’t) destroy the video game industry. Then we leap forward into successive eras to figure out how licensed games ended up where they are today, touching on crummy console games (Friday The 13th, Jaws, Back To The Future), great arcade games (The Simpsons, Teenage Mutant Ninja Turtles), crummier mobile games (Frozen: Free Fall, Pacific Rim: The Mobile Game, tons of Marvel garbage), and Kingdom Hearts, which is just its own whole thing.

To cap off the episode, we discuss the impending Marvel-fication of big-budget video games, with major developers like IO Interactive, Insomniac, EA, and Ubisoft turning their prodigious talents toward series like James Bond, Spider-Man, Star Wars, and, er, Stars Wars again, respectively, instead of imagining original, more timely universes. Maybe their games will breathe new life into tired characters, but there’s a very real risk that Hollywood will infuse the video game industry with its own (even more) risk-averse sensibilities. Then again, big studios were already heading in that direction on their own, so who’s really to say at this point? Us, that’s who.

Get the MP3 here, and check out an excerpt below.

Nathan: To begin, E.T. was very bad. It was made in five weeks by one guy. And while it was not uncommon for very small teams to make games back then, they would usually have six to eight months rather than a few weeks. The guy who made E.T., Howard Scott Warshaw, previously made a game based on Raiders Of The Lost Ark, and for that, he had 10 months. So again, 10 months, five weeks — very different timespans.

Ash: Is there a reason why there was a crunch? Did Spielberg lock Warshaw in his basement and say, “You can’t leave until you make E.T.”?

Nathan: You nailed it. It was like a Saw scenario. It was really messed up. No, so what happened is, Atari and Spielberg fought over how much Atari would pay for licence rights. And by the time they agreed upon a $US21 ($27) million deal (reportedly), they only had a few weeks before the holiday season, when they wanted the game to come out. Plus, they still needed time to make cartridges and all that. But they were like “Well, it’s E.T. It’s the biggest thing going. No matter what gets made, we’ll be fine. We can put the game out, and it’ll sell.”

Then Warshaw set to work. At the time, he was the golden boy. He’d made Raiders Of The Lost Ark. If anybody could do this, it was him. He also thought that. He was like, “I’ll do it. I can do it. Five weeks? I’ll make it happen.”

Unsurprisingly, given that terrible crunch and despite Warshaw’s best efforts — because it does sound like he tried — the game turned out really bad. Basically, it’s a game in which you’re trying to collect bits of a phone to help E.T. phone home, and you’re avoiding holes and government operatives. The basic gameplay loop is that you wander around in an environment with no clear goals, and you fall into a hole, but it’s really hard to escape the hole, so you fall back down, and then enemies attack you, and you die. That’s the game!

Fahey: Woohoo!

I was a kid back then. We had an Atari. That game made no sense to me. I remember being flummoxed. I remember playing it. I remember even going back to play it again and hoping I’d be able to figure something out and going, “No, this is not a kids’ game.”

Ash: Is it the Dark Souls of Atari games?

Fahey: Dark Souls is enjoyable to some extent. This was just… You’d fall into the hole and couldn’t get out. There were Reese’s Pieces to collect. I was so confused. The only thing more disappointing than E.T. was that Pac-Man port we got on the 2600.

Nathan: It’s funny you should mention that because as we move into what actually caused the 1983 video game crash, the Pac-Man port is illustrative. Basically, at the time, companies like Atari were overproducing the number of cartridges they’d put out into the wild on the basis that the Atari 2600, especially, was doing really well. So they figured that would just keep happening, and when they put out that Pac-Man port, which was not very good, they made 12 million cartridges. At the time, only 10 million people owned the Atari 2600, so they made more cartridges than there were owners of the console.

They did a similar thing with E.T. They made 4 million cartridges. Initially, the game sold pretty well. It was E.T. Everyone was just like “Oh, hell yeah, we love E.T. It’s the ‘80s.” They said that out loud. It was really weird. So the game sold over 1 million copies, but because they made 4 million, they still ended up with a massive surplus of unsold copies. That led to a bad 1982 holiday season for Atari, which sent stocks plummeting. By the second quarter of 1983, Atari’s parent company announced losses of $US310 ($404) million, not all of which were due to E.T., but E.T. played a role. Over time, there were cascading effects. Retailers started stocking fewer video games and consoles. In 1982, the sales of the video game industry were $US3.2 ($4) billion. In 1985, they’d dropped to $US100 ($130) million. So, huge drop-off.

Ash: What the hell happened?

Nathan: Ah, that is the fun part. So E.T. was symptomatic of what was going on. It was not the main issue. By 1982, a lot of people were making video games. Many of them were not good at making video games. They made a lot of very, very bad video games. E.T. was one of them, but it was far from the only one. One of my favourite examples from the time was about Purina dog food because one of the reasons people were making so many bad video games is that companies looked at games as an opportunity for advertising. So they’d hire amateur coders and be like, “Make us a game about whatever the fuck.” There was a game about the Kool-Aid man, and it was bad. The dog food game was called Chase The Chuck Wagon, and it was also bad.

So you had the market flooded with bad games, and on top of that, you had tons of consoles. It wasn’t just Atari. And by the way, Atari had tons of different versions of their platform, which was already confusing and weird. But you also had ColecoVision, you had Intellivision, you had Milton Bradley’s Vectrex, you had the Magnavox Odyssey.

Fahey: Vectrex was beautiful. We’ll get there someday and talk about that.

Nathan: OK, we can do our Vectrex episode in a few weeks. But you had all these different platforms, which was confusing, and there was not a lot of crossover between the games on each platform, so it was hard for any one game to get really big. It was a madhouse. This led to people getting really tired of all of it and also not having a lot of trust in anybody who was making games because there was a good chance you’d buy a game, and it would be terrible. That led to a lot of people increasingly becoming disenchanted with consoles.

But the important thing to keep in mind is that even though we call it The Video Game Crash Of 1983, it wasn’t really a crash. It was more a reallocation of resources and video games. Console makers had a ton of trouble, and those companies all tanked, and things went poorly for them. But the PC took off in part because so many people were tired of consoles. There were positive knock-on effects from this. Because the home computer market took off in the wake of consoles imploding, that gave rise to a generation of coders, who in turn ended up making games later for other platforms like the NES.

On top of that, because of the “crash,” games and consoles had their prices severely slashed, meaning more people could afford them and learn to enjoy the hobby. More young people were able to get into games in the intervening period between the Atari and the NES in the late-’80s.

Fahey: My birthday in 1984 kicked arse. I got the Vectrex and every game available on clearance from Toys “R” Us. My mum got the Vectrex for, like, $25 — for this standalone video game console with its own monitor. She also got, like, 20 games for dollars. Dollars for the games! It was so beautiful. What a time to be alive.

For all that and more, check out the episode. New episodes drop every Friday, and don’t forget to like and subscribe on Apple Podcasts, Spotify, or Stitcher. Also, if you feel so inclined, leave a review, and you can always drop us a line at [email protected] if you have questions or suggest a topic. If you want to yell at us directly, you can reach us on Twitter: Ash is @adashtra, Fahey is @UncleFahey, and Nathan is @Vahn16. See you next week!


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