The Ultimate History of Video Games: From Pong to Pokémon and Beyond—The Story Behind the Craze That Touched Our Lives and Changed the World

by Steven Kent

  Hochberg moved to Florida to take a job working in a large amusement arcade owned by Mervin Sisken, the son of the man who brought him into the industry. They worked together for seven years, during which time Hochberg’s knowledge of the industry earned him a national reputation.

  When Hochberg and Sisken split under unpleasant circumstances, Hochberg opened an under-funded arcade of his own. Unable to afford help, he worked 14-hour days, 7 days a week. Despite the long hours, his debts mounted. Just as it looked like he might have to close, the owners of Allied Leisure contacted him, suggesting an attractive partnership. Hochberg moved from maintaining equipment to sales and design.

  It was during this time that Atari released Pong. Hochberg tried the new medium and was impressed. Two years later, Gene Lipkin invited him to lunch to meet Bushnell.

  Nolan Bushnell came to visit me here in south Florida when we had the game room at Nathan’s (a popular restaurant). Gene was working for Atari at that time.

  Nolan, pipe and all, made his way to south Florida to visit with me at our game center. His question was, “Do you think video games are here to stay?”

  The answer that I gave him was, “I don’t think there’s even a possibility of turning back. I think that the customer, the player, has gotten such a taste of technology utilized in a format that makes things appear to be so real, there’s no chance of the industry turning back.”

  I’m not quite sure why he asked that question since he was the pioneer.

  —Joel Hochberg

  Though both Bushnell and Hochberg were in the same industry, they did not keep in touch with each other. Bushnell continued his tour, meeting with arcade owners and trying to satisfy his insecurity about the industry’s future.

  Hochberg continued with Allied Leisure for a while and eventually started his own business again. By this time he had established international relationships, which soon fostered unique advantages in the amusement industry.

  In another decade, Bushnell and Hochberg would trade places. Bushnell would become the established authority, while Hochberg became a famous maker of games.

  Only the Paranoid Survive

  Atari’s first years were filled with notable successes and important failures. When asked about the early years at Atari, Nolan Bushnell and those around him remembered the fun times, but they also recalled struggling to come up with new ideas. Bushnell’s constant drive to expand the business depleted Atari’s revenues, and growing competition cut into company profits.

  Even in stressful situations, however, Atari’s corporate philosophy of smart work and hard partying continued. Atari executives still had hot tub meetings and Grass Valley parties, though partying did not alleviate their concern for the future. Bushnell spoke publicly of long-term interest in computer games, but he privately questioned whether Atari’s success had been the result of luck or skill. He knew he had outflanked the competition so far, but he wondered which company would pose the next serious threat. He needed a scheme to maintain his advantage.

  Keeping that advantage was of dire importance because of a unique set of dynamics within the amusement industry. In the early 1970s, most cities had two or three dominant vending-machine companies competing to do business in every arcade and bowling alley. These companies inevitably controlled the bulk of the location-based amusement routes.

  In the early 1970s, an unstated rule within the industry mandated that vending companies serving the same area should not buy equipment from the same manufacturer. If, for instance, the largest distributor bought Bally pinball machines and Rock-Ola jukeboxes, its competitors needed to carry products from other manufacturers. Bushnell’s goal was to find some way to break that rule and sell equipment to competing distributors.

  In 1974, Atari met that formidable competitor—a start-up company called Kee Games. Founded by Joe Keenan, Bushnell’s next-door neighbor, Kee Games was supposed to have lured away two of Atari’s “five princes”: Gil Williams, of manufacturing, and Steve Bristow, of engineering.

  A bitter rivalry began as soon as Keenan announced his new company. In public, Bushnell tried to appear magnanimous. But confidentially, he floated rumors that Keenan and crew were renegades not to be trusted.

  [We used to complain about Kee Games.] “Oh those bastards,” you know, we’d bad-mouth them. They [the distributors] just loved it ’cause they thought we were all crooks anyway, and they loved the idea of being able to go around us. Sometimes we’d say Kee stole our engineer [Bristow]. We gave him to them.

  —Al Alcorn

  At one point, the rivalry became so bitter that Atari executives made accusations about industrial espionage:

  One weekend I drove around to the back of the [Atari] building. While my wife talked with a security guard and kept him busy, I threw circuit boards and equipment through a window and loaded them into my car.

  —Steve Bristow

  For years, Bushnell refused to believe that Bristow would take such a risk for what amounted to little more than an elaborate ruse. Kee Games, as it turned out, was created by Atari, and Bushnell and Alcorn sat on its board of directors. Rather than chance a real rivalry with an established amusement manufacturer, Bushnell had created a controlled competitor.

  The stories of industrial espionage and bad feelings were an elaborate cover that had taken on a life of its own. When Bristow had his wife distract the security guard and slipped into his old office, he simply added more reality to the myths about the competition between Kee Games and Atari.

  Bushnell’s plan was to compete with himself, selling Atari products to the largest local distributors and Kee products to his competitors.

  Just like Andy Grove [former president of Intel] says, “Only the paranoid survive.” I wanted to hijack the competition, so I created the number two guy.

  Joe Keenan was my next-door neighbor. I told him, “I’d like to hire you to set up a company and call it Kee Games. We’ll make it look like it’s Kee, for Keenan, and it will look like you’ve come in and started up a new coin-op machine manufacturer.” We gave him our number two man in manufacturing and our number two man in engineering—Bristow and Williams.

  —Nolan Bushnell

  We made up a new company named after Joe Keenan—Kee Games. We made it sound like it was full of renegades. We gave him Steve Bristow to be the V.P. of engineering—gave him some designs to get started. Nolan and I were on their board. If any of the distributors wanted to check, they could see in the corporate records that we were part of the company.

  —Al Alcorn

  The strategy solidified Atari’s hold on the market. The only problem was that Kee Games became more dangerous than Bushnell anticipated. In 1974, while Atari’s research and development team was still focusing on Pong and racing games, Steve Bristow designed an innovative combat game named Tank.

  Tank had very primitive graphics. Players controlled either a black or a white tank that consisted of a square with a line sticking out of the front representing a gun turret. By December, the game had become a runaway hit.

  While Kee Games scored well with Tank, Atari found itself falling behind. Grantrak 10, one of Atari’s first driving games, had been very expensive to develop and even more expensive to distribute. The Grass Valley team designed the game, but after delivering it, Atari found that it was nearly unplayable. Alcorn fixed the game’s control problems, but other complications followed.

  It cost $1,095 for Atari to manufacture Grantrak 10, but because of an accounting error, the finished game was sold for $995. The company lost $100 on each unit sold, and Grantrak 10 became Atari’s bestselling game of 1974.2

  The only animosity was that Atari was dying and Joe Keenan was a great president who had skills that Nolan didn’t have. They wanted to cut the cord and watch Atari die and they’d survive. And Nolan and I said, “No way.”

  Ron Gordon, Bushnell’s vice president of international sales and marketing, came back and said, “Okay, look here’s what you do. Merge Kee Games
back in with Atari and put Alcorn back in engineering. Let Joe be the president [of both companies].”

  That’s exactly what happened, but there was a time when Nolan was just in tears. He saw his company dying.

  —Al Alcorn

  Bushnell’s scheme had worked, yet it began having negative effects. Through Kee Games, Bushnell had nearly doubled his distribution, but now he had to merge both companies to keep Atari alive. Atari’s lackluster year, combined with the overhead costs of starting up and running a second company, had gouged deeply into Atari’s profits.

  Historically, several companies have created controlled competition in the past. Bushnell’s coup was that he actually fooled the entire amusement industry into believing that Kee Games and Atari were bitter rivals. Even after the merger, when it became public knowledge that Bushnell had been a Kee board member all along, people had trouble believing it. Only one shrewd distributor had seen through the guise.

  The thing about it is that nobody in the coin-op business figured out what we’d done except for one guy, Joe Robbins. He was with Empire Distributing and later went to Bally. I remember him coming up to me at a trade show and saying, “Bushnell, you think you’re pretty clever. I know your number, but I respect you. I knew what you were doing and you did it really well.”

  —Nolan Bushnell

  A 20-Year-Old Ho Chi Minh

  The personnel lady came in with a young candidate who had shown up on our doorstep. He was this real scuzzy kid. She said, “What shall we do?”

  I think I said, “We should either call the cops or we should talk to him.” So I talked to him.

  The kid was a dropout and really grungy. He was 18 years old and he knew something…. He had a spark of brilliance. Don Lang, one of my engineers, was asking for a tech, so I said, “Great. I’ll give you a job working for a real engineer.”

  The next day Don came to me and said, “What did I do to deserve this?”

  I said, “What? You wanted a tech, you got a tech.”

  He said, “This guy’s filthy. He’s just obnoxious. And he doesn’t know electronics.”

  The kid worked out in the end. His name was Steve Jobs.

  —Al Alcorn

  Shortly after Atari re-absorbed Kee Games, Al Alcorn hired the man who would become the company’s most distinguished alumnus—Steve Jobs. Though he went on to found such companies as Apple Computers and Pixar Animation Studios, at the time Jobs was little more than a skinny kid with long hair and a wispy beard. Several people described him as looking like a “20-year-old Ho Chi Minh.” (Ho Chi Minh was the leader of North Vietnam during the Vietnam war.)

  Like many luminaries in the computer industry, Jobs knew more about technology than social graces. He was dismissed as a hippie by most of his fellow engineers. According to Alcorn, Jobs once came to work with a jar of cranberry juice and told his supervisor he was fasting. “He said, ‘If I pass out, just lay me on the workbench. Don’t call the police, please. I’ll be fine. I’m just a little weak right now.’”

  Some co-workers complained that Jobs smelled bad. He offended others by openly treating them like idiots. In the end, Jobs’s genius helped him emerge as a valuable employee, but by that time, he had managed to make enemies throughout the company.

  If he thought you were a dumb shit, he’d treat you like shit. That pissed certain people off. I liked him a lot…. Still do.

  —Nolan Bushnell

  In 1975, Jobs decided to make a pilgrimage to India. At the time, several Tank machines had broken down in Germany. Alcorn offered Jobs a one-way ticket to Germany if he would fix the machines.

  He wanted to go to India to meet his guru. I said, “Fine, I’ve got a problem in Germany.”

  The German distributors would take our boards and hook them up to 60-cycle monitors to make games, but they only had access to 50-cycle power and they had bad ground loops. I gave Steve a quick course in ground-loop power-supply repair and a one-way ticket to Germany. I figured it would be cheaper to get to India from Germany than it would be from here [California].

  I found out later that it would have been cheaper to leave from here.

  He fixed their problem, but they were freaked because Steve Jobs is the antithesis of the Germans. They’re meat and potatoes and beer, and he’s air and water and vegetables … maybe.

  —Al Alcorn

  Jobs handled the problem without a hitch. When he returned from his pilgrimage several months later, Alcorn hired him back.

  Steve came back around the time that we were starting up the consumer stuff. Steve was wearing saffron robes and a shaved head…. gave me a Baba Ram Das book. Apparently, he had hepatitis or something and had to get out of India before he died.

  I put him to work again. That’s when the famous story about Breakout took place. That’s a big story that’s often told wrong.

  —Al Alcorn

  Breakout

  Shortly after Jobs returned, work began on a game called Breakout. From the start, the game took on special significance. Nolan Bushnell created the concept himself.* (As things turned out, it was the last game Bushnell created at Atari. In fact, nearly twenty years passed before Bushnell designed another game.)

  Breakout was a reiteration of Pong, in which players used the ball to knock bricks out of a wall at the top of the screen. Though Bushnell knew consumers would love Breakout, he worried about the cost of manufacturing the game.

  In order to cut costs, Atari engineers tried to minimize the number of dedicated chips used in their games; tightly designed games had around 75.

  In those days, Atari shipped approximately 10,000 copies of its most popular games. Because of repair costs and reduced circuit-board space, Atari saved approximately $100,000 for each chip removed before production. Bushnell wanted his engineers to reduce the number of chips in Breakout but got a less-than-enthusiastic response when he asked for volunteers.

  We had this bidding process. Nobody wanted to do Breakout. I remember that I figured that Breakout was going to be about a 75-chip game, so I’d give a bonus for every chip they took out.

  —Nolan Bushnell

  Steve Jobs accepted the challenge. By this time, Jobs and his partner, Steve Wozniak, had begun developing the Apple II, generally regarded as the computer that launched the personal-computer industry. Wozniak worked for Hewlett Packard. He was a member of the Homebrew Computer Club, a group of early enthusiasts who built their own computers. Other Homebrew members considered Wozniak, or “Woz,” to be the most brilliant member of the club. Jobs turned to Wozniak for help in minimizing Breakout’s circuitry.

  So meanwhile, Steve’s friend, Wozniak, comes in the evenings. He would be out there during burn-in tests while these Tank games were on the production line, and he’d play Tank forever. I didn’t think much of it; I didn’t care. He was a cool guy.

  I found what really had happened is Jobs never designed a lick of anything in his life. He had Woz do it [redesign Breakout].

  Woz did it in like 72 hours nonstop and all in his head. He got it down to 20 or 30 ICs [integrated circuits]. It was remarkable…. a tour de force.

  It was so minimized, though, that nobody else could build it. Nobody could understand what Woz did but Woz. It was this brilliant piece of engineering, but it was just unproduceable. So the game sat around and languished in the lab.

  —Al Alcorn

  Wozniak was able to remove more than 50 chips from Breakout, but his design was too tight. No one could figure out how he did it, and the manufacturing plant could not reproduce it. In the end, Alcorn had to assign another engineer to build a version of Breakout that was more easily replicated. The final game had about 100 chips.

  Bushnell and Alcorn disagree on some of the details concerning Steve Jobs’s bonus. Bushnell remembers offering Jobs $100 for each chip he removed. He claims Wozniak removed 50 chips and Jobs received a $5,000 bonus. Alcorn says that Jobs was told to reduce the design to a maximum of 50 chips and that he would receive $1,000 for ev
ery chip he removed beyond that mark. According to Alcorn, Jobs pocketed a $30,000 bonus.

  Alcorn and Bushnell both agree, however, that Jobs misled Wozniak about the amount that he received. Jobs told Wozniak that the bonus was only one-tenth of what Bushnell actually paid.

  I think we’ve got an order of magnitude problem here.

  Jobs misled Wozniak, but Jobs got five grand and Woz got half of $500. I mean the macro-numbers are right, as it was told. I’m just saying that the denominator, the dollars per chip, is off.

  —Nolan Bushnell

  And Nolan says, “For every chip less than 50 I’ll give you $1,000 cash bonus.”

  Now Jobs didn’t use the money for his own personal gain. He put it into Apple. But still, the fact that Wozniak’s best friend lied to him broke him up. That was the beginning of the end of the friendship between Woz and Jobs.

  —Al Alcorn

  According to Silicon Valley legend, Steve Wozniak discovered that he’d been misled many years later, while flying on a business trip and reading a biography about Jobs. Nolan Bushnell says that the legend is not true.

  You want to know the real story? Woz was up here to a Sunday afternoon picnic at our house. We were talking and I asked, “What did you do with that $5,000?”

  He says, “What?”

  He was visibly upset. Wozniak’s tender. I mean, he’s really a good guy.

  —Nolan Bushnell