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

  —Al Alcorn

  Magnavox sold 100,000 Odysseys. Atari sold 150,000 Home Pong machines in a single season. The first heyday of the home video-game console had begun.

  New Competition

  Coleco was located in Connecticut, outside of Hartford. In their later years, they moved into what was once a high school. Before that they were on Asylum Street. That place was like an asylum.

  —Ralph Baer

  With the success of Home Pong, an army of new competitors entered the home video-game market. Seventy-five companies promised to launch home television tennis games in 1976.1 Obscure companies like First Dimension, of Nashville, Tennessee,2 and established giants like RCA proposed game consoles that looked and worked like Pong.

  Atari’s most powerful competitors were Magnavox and National Semiconductor. Magnavox re-entered the market with Odyssey 100, a new console that, unlike its predecessor, only played tennis. Magnavox had more advertising muscle than other companies in the video-game business, but the poor sales of the original Odyssey did not impress retailers.

  National Semiconductor, a company that once made chips for Atari’s coin-operated games, posed a more significant threat. Atari and National Semiconductor had stopped doing business with each other under unfriendly circumstances, back when Atari and Kee Games were separate companies.

  Suspecting that Atari would not be able to pay its bills, National Semiconductor demanded that Atari pay cash up front for custom chips. Since Atari’s income was generated by selling finished arcade machines, National Semiconductor’s demand nearly paralyzed the company’s cash flow. In the end, Steve Bristow, then working for Kee, developed discrete “piggyback” boards that were able to serve the same function as National Semiconductor’s chips. Bristow’s solution worked so well that Atari adopted it as well.

  In 1976, National Semiconductor decided to compete with Atari in the consumer game business.

  They then proceeded to try to steal our consumer business. So they showed up at that same toy show with a bad version of our Pong game. It never sold.

  We then summarily handed them a copy of our patent, which we later found out was null and void. Fortunately, we didn’t push it very far cause it could have backfired on us. You ever try to force a bad patent? You’re in real trouble if you do.

  —Al Alcorn

  Atari’s most persistent competition came from a small company located across the continent—the Connecticut Leather Company, better known as Coleco.

  The company started with Indian crafts. From there, it became an outdoor products company, making above-ground swimming pools out of plastic.

  —Mike Katz, former president, Coleco

  Coleco was a family business run by two brothers—Arnold and Leonard Greenberg. Arnold made most of the decisions. His associates described him as a short, anxious man with a quick temper and an aggressive desire to build his company into an empire. One person described him as a “buttoned-down lawyer who was very creative, very forceful, and willing to take great chances.”

  When Greenberg took over Coleco, the company produced kits for leather crafts. In 1956, Greenberg acquired equipment to manufacture plastics, and Coleco became the leading manufacturer of above-ground swimming pools. Ten years later, Coleco took over Eagle Toys and entered the toy business, making tabletop hockey and football games.

  In 1975, Greenberg decided that Coleco should expand its product line to include a home video game. His engineers designed a video tennis console called the Telestar, and Greenberg ordered the necessary chips from General Instrument, the microelectronics company that supplied chips to most video-game manufacturers.

  In the beginning, Coleco’s success seemed preordained. Of all the companies that ordered chips for console games from General Instrument, only Coleco received the quantities requested.

  As it turned out, Coleco was the first company to place its order. Surprised by the number of orders received, General Instrument was unable to manufacture enough chips to satisfy its customers. As the first customer in line, only Coleco had its order filled and it looked as if the Telestar would have little competition if it reached the market by the proposed launch date of June 1976.

  But Coleco ran into trouble when the prototypical Telestar console its engineers submitted for FCC approval did not pass interference tests. During the demonstration, FCC representatives discovered that the Telestar generated radio band interference. Greenberg was given a week to eliminate the problem and have his product approved or he would have to resubmit his product at a later date and go through the entire approval process over again. The process could have put them months off schedule as they waited for the FCC to reopen the case.

  During this period, Coleco had been considering hiring Sanders Associates, the company that developed the original Odyssey, to develop future products. In desperation, both Greenberg and his chief engineer called Sanders for help. Ralph Baer, the man whose team designed Odyssey, agreed to find a way to block out Telestar’s interference if Greenberg signed the contracts he had pending with Sanders.

  The phone rings, and it’s the chief engineer of Coleco. They had just been rejected by the FCC because they couldn’t meet RFI [radio frequency interference] specs. They were told, and this was a Monday, that if they were not back by Friday, they would go to the end of the queue [for approval needed to sell their product]. At that moment, they had $30 million worth of game inventory, and that would have thrown them out of the Christmas business…. they were desperate.

  So here’s this chief engineer on the phone with me, asking if we can help them overcome the problem. Meanwhile, Arnold Greenberg’s on another line speaking to my boss.

  I said, “Sign the agreement, license the agreement, and we’ll help you.”

  They came the next morning, bright and early, from Hartford. They were there and signed the agreement. I took the machine up to the fifth floor of the building. We did radio frequency interference measurements up there. We made measurements and we found that they indeed were out of spec—radiation was too high.

  —Ralph Baer

  Baer tried several conventional methods of building a shield to block out the Telestar’s interference. Nothing worked. He went home frustrated at the end of the day. When he returned the next day, he stumbled across a possible solution.

  I came into the lab the next morning, scratching my head. Nobody was there yet; I was early. I walked around the lab, went outdoors to get the measurements started, and saw two pieces of equipment sitting on a bench connected by a piece of coaxial cable. The end of one of the cables was a ferrite toroid (ring).

  Later I asked somebody, “What’s this for?” Miracle of miracles, the guy actually knew. They had been out in the field, they picked up external RF from some transmission, and they suppressed it by putting this toroid on it, which acts like a choke.

  —Ralph Baer

  Baer made a new shield using the ferrite rings. When he tested it on the Telestar, the interference was within acceptable levels. He gave the shielded unit to Greenberg, who returned to Washington, D.C., and received approval to market his machine.

  The Telestar came out in time for Father’s Day, 1976. Coleco sold over $100 million worth of the consoles and rose to the top of the consumer game business. Its leadership, however, was short-lived. In August, Fairchild Camera and Instrument released a new game console that permanently changed the industry.

  The Rise of Cartridges

  Fairchild Camera and Instrument, one of the companies that pioneered the development of the transistor, released a new video-game console called the Channel F in August 1976. Several features made the Channel F different from other consoles. It had unique controllers with triangular handles at the end of long shafts. One person described the controllers as looking like the plunger on a device for detonating bombs.3 More important, the Channel F played games stored on interchangeable cartridges.

  The original Odyssey played twelve games hardwired into the console�
�s circuitry. To change games, players inserted circuit boards into a slot in the front of the console. Inserting Odyssey circuit boards was, in effect, like changing dip switches inside the console. (Odyssey also came with plastic overlays to add color and backgrounds to its games. The Channel F had color games and did not require overlays.)

  Like every other game system, the Channel F had tennis and hockey programmed into its circuits, but Fairchild released additional games stored in casings that looked like 8-track tapes. They called the game units “Videocarts.” Each Videocart contained a microchip with a game programmed into it.

  Though the Channel F never developed a large following, it changed the consumer market forever. Consumers no longer wanted single-game consoles at any price. RCA responded quickly by announcing that it had a new game console under development, Magnavox went back to the lab, and Atari’s engineers stated that they had named a new computer chip after a bicycle.

  Stella

  By the middle of 1976, Atari was no longer the star of the Sears catalog. Coleco had stolen the home market, and the Fairchild Channel F had rendered Home Pong worthless. In fact, television games had become a bit of a joke.

  Many consumers lost interest in playing video tennis shortly after purchasing their systems. Game consoles were being thrown in closets or unloaded at garage sales.

  Atari executives had recognized the need for a new technology even before Channel F hit the market. Restless as ever, Nolan Bushnell no longer believed that Atari’s previous consoles, which were designed with a single game hardwired into their chips, would continue to attract consumers. To compete with the Channel F, Atari would need a console that could read and process information like a full-blown computer. The new system would have to read and display information on a television screen. Nolan Bushnell turned to his Grass Valley team for help.

  Steve Mayer, brilliant man, basically solved the problem. All of the other companies were run by semiconductor companies that made them use a memory map as a frame buffer. We didn’t want a frame buffer. Back in those days it was way too expensive.

  We wanted to find a way to make the system with minimum silicon. The other companies’ video games were all done by semiconductor companies. We were the only one that did our own design.

  —Al Alcorn

  Steve Mayer, one of the founders of the Grass Valley facility, looked for alternatives to the expensive Fairchild F8 microprocessor used in the Channel F. He found the MOS Technologies 6502, a general purpose microprocessor capable of creating images on a television screen in real time—nearly instantaneously. Building off the 6502, the Grass Valley team designed a custom chip they named “Stella,” after an engineer’s bicycle.

  Though the Grass Valley engineers had the expertise to design the Stella chip, they could not manufacture it. Al Alcorn took the design back to Atari and consulted with his research and development team. In the end, they decided to bring in an expert to finish the project.

  Harold Lee, who co-designed Home Pong, told Alcorn that the only person who could build a chip as complex as Stella was a man named Jay Miner—the chief microprocessor designer at Synertech, a company that created custom chips for Atari.

  Following Lee’s advice, Alcorn went to Synertech and asked the company to loan him Miner as a consultant.

  I went to Synertech and said, “I want Jay Miner to work on this project.”

  They said, “No, he’s our chief CPU chip designer.”

  “But you don’t understand. I really want him. I’ll pay his salary plus I’ll give you all the business you can handle to keep your factory full.”

  They said, “You’ve got a deal.”

  Miner ended up with two badges. He had a Synertech badge. He had an Atari badge. He was our chip guy.

  —Al Alcorn

  After he had secured Miner to lead the Stella development team, Alcorn selected other members. The final team included Larry Wagner, a mathematician who was already programming games, and Joe Decuir, a skilled engineer.

  Once the work started, Miner proved himself quickly. By most accounts, Miner was an austere and brilliant man. He often brought his small cockapoo, Mitchie, to work and usually remained at his desk late into the evening. When the team had problems, Miner invented ingenious solutions, and the team was able to finish Stella on schedule.

  When a second member of the team approached Alcorn about bringing his dog to work, he received this response. “That mangy golden retriever?” Alcorn snapped. “You bring that animal here and I’ll have the guards shoot it on sight. You start doing work like Miner and get yourself a decent dog and we’ll talk about it.”

  Mayer’s decision to use the 6507 microprocessor proved correct. Not only would Atari’s new game system be less expensive to build than the RCA and Fairchild game consoles, it would process information more quickly. Officially named the “Video Computer System” (VCS), Atari’s new console was more than a game machine; it was a computer with a eight-bit processor.

  Bushnell worried that once he unveiled his new system, the “jackals” would start imitating it. The only way to stop them, he decided, was to saturate the market before his competitors came out with similar products. He would catch the market by surprise and take it by storm.

  Before Bushnell could move ahead with his plans, however, he needed another infusion of cash. By this time revenues from Home Pong sales had practically disappeared, and the coin-operated business was drying up. Too many people had purchased Home Pong or a similar system and no longer wanted to spend quarters to play “television games.”

  Year of Transition

  By 1976, video games had made a permanent impact on the arcade industry. In an interview with RePlay Magazine, Joe Robbins, a vice president of Empire Entertainment, declared electromechanical games extinct:

  Electro-mechanical games, with some exceptions, are becoming pretty rare offerings. The cost of making them has forced most manufacturers to cancel most production plans. This includes the once-popular gun types and baseball games, to name a few.

  The steady and abundant stream of TV games will slowly diminish. Right now, large runs are confined to only the best games. It is even becoming difficult to sell the TV game that is just good or marginal. And this trend is irreversible. The number of manufacturers will decrease—and so will the number of new games. But we will enter a new generation of TV or similar games. They will inevitably stimulate renewed interest, enthusiasm, and earnings.4

  If Robbins was correct, Atari would certainly be one of the companies to benefit most, but Midway had also distinguished itself with games like Sea Wolf, the most popular game of 1976. While Atari mostly created tennis, driving, shooting, and tank games, Midway produced innovative games about gunfights and naval battles.

  Sea Wolf represented a new high point in game presentation. Before Sea Wolf, most video-game cabinets looked similar. There were a couple of odd cabinets, such as Computer Space and Space Race, which were made out of fiberglass and had rounded corners, and Maneater, which had a cabinet shaped like a shark.

  But for Sea Wolf, Midway attached a periscope in front of the screen for players to use for shooting torpedoes at ships and submarines. Hitting slow-moving ships earned few points. Hitting speedy PT boats earned more points.

  The concept was not original. In 1966, Sega, the largest arcade company in Japan, created an electromechanical game called Periscope that used lights and plastic waves to simulate sinking ships from a submarine. Periscope was the first game to cost 25 cents per play. Prior to this, games cost a dime. Several arcade owners imported it to the United States, where it was imitated by many competitors—including Midway.

  Sea Wolf, which was another creation of Dave Nutting, did solid business, selling more than 10,000 machines. (A later color version, Sea Wolf II, sold an additional 4,000 units.) With few exceptions, however, the coin-operated video game was declining, and most games sold under 5,000 units.

  The public was losing interest. The novelty of
playing games on a television had disappeared. Video games had been around for four years. People even had them in their homes. Unless someone could come up with a method for restoring the novelty, it looked like the industry would continue to stagnate.

  The slow demise of video games did not necessarily hurt arcade owners. Pinball made a strong comeback in 1976. The first generation of solid-state pinball machines appeared in arcades. Though solid-state pinball machines played like older games, they had the advantage of scoring memory, allowing the game to recognize the playfield for the progress of each player from ball to ball.

  Even Atari, the company that started video games, began manufacturing pinball games. Under Bushnell’s direction, the company opened a special pinball division that created extra-wide pinball machines.

  The Decision to Sell

  Atari was one of the great rides…. It was one of the greatest business educations in the history of the universe.

  —Manny Gerard

  Around this time, Steve Jobs left Atari to dedicate himself to manufacturing and selling the computers he created with Steve Wozniak. Jobs asked Bushnell to invest in his company, but Bushnell declined. Jobs finally approached Don Valentine for capital. Valentine insisted on some special arrangements. Jobs agreed, and Apple Computer was born.

  Instead of asking Valentine for more capital, Bushnell held a board meeting in which he discussed other options—going public or selling the company. Their first choice was to make a public offering of Atari stock, but after taking several steps toward the offering, the board decided that the slumping stock market would not support their move.