Replay: The History of Video Games

by Donovan, Tristan

  Taito in particular was working hard to turn itself into the Japanese answer to Atari. After the success of its 1973 Pong clones Elepong and Soccer , the company started to explore new video game concepts. In 1974 Tomohiro Nishikado, the designer of Soccer , created the company’s first truly original game: the racing game Speed Race . As with Gran Trak 10 , the action was viewed from above but instead of squashing a whole track into one screen, Speed Race created the impression of a larger course by having rival cars move down the screen as the player accelerated. The player, whose car could only be moved left to right and spent the whole game at the bottom of the straight-line race track, had to weave in and out of the traffic as he or she overtook the other racers. “Until then there had not been any games that differed greatly from Pong in Japan,” said Nishikado, who started his career at Taito making electro-mechanical games. Speed Race proved popular both in Japan and in the US, where Bally Midway released it as Wheels , providinghe earliest indication that Japan was destined to become a major force in video games. “Until then we only imported games from the US and with this game we managed to start exporting games to the US,” said Nishikado.

  Atari Japan, meanwhile, ate through $500,000 before Bushnell admitted defeat in 1974, just as the company’s failure to go through the right channels began to catch up with it. “Basically, to keep from going to jail we had to sell it,” said Bushnell. Atari Japan was sold to Nakamura Manufacturing, a Japanese coin-op manufacturer and distributor formed in 1955 by Masaya Nakamura that would rename itself Namco in 1977. The buy out made Nakamura Manufacturing the exclusive distributor of Atari games in Japan for 10 years. The Atari Japan disaster, the under-pricing of Gran Trak 10 and the slowing sales of Pong games left Atari teetering on the edge of closure. Then, just as it looked like Atari was doomed, one of Bushnell’s more wily business moves came to the rescue.

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  Back in late 1972 when Pong became a runaway hit, Atari discovered that the coin-op distribution system in the US limited its ability to profit from the game. The coin-op business was based around distributors who bought the machines and then sold the machines to, or installed them in, the various bars, arcades and other outlets they supplied. To attract these locations to their network, distributors demanded exclusive deals from manufacturers for the geographical areas they covered so that only they, and not competing distributors, had access to certain machines whether that was Atari video games, Bally pinball tables or Rock-Ola jukeboxes. So in a town with two distributors, a coin-op manufacturer could only hope to get its machines in the locations in one of those distributors’ networks.

  Bushnell worried this system not only meant Atari sold fewer games but would also encourage the formation of a serious competitor. He hit on a novel solution – he would form a bogus rival that would repackage Atari’s games and sell them to the distributors that Atari could not work with because of pre-existing deals. “It was a defensive strategy as much as an offensive strategy,” said Bushnell. “I was always looking to put anybody who copied us out of business if I possibly could. That was kind of my ethic. I found that the distributors that we did not have in each of these cities were desperate to find somebody to knock our products off to be able to compete with the guy across the town that had our stuff. I said this is a gigantic demand that is going to create a competitor that might be somebody that’s actually good, so let me make it so much harder for them by satisfying that demand. That’s what Kee Games was all about. I wanted to cut off distribution to would-be competitors.”

  Kee Games was named after Joe Keenan, the friend of Bushnell’s who agreed to head up the pretend competitor. Bushnell also appointed Bristow as the new company’s vice-president of engineering. To convince the coin-op industry that Kee Games was a real competitor to Atari, Bushnell concocted a cover story about how Bristow and other Atari employees had jumped ship to form their own company. “The original thing we leaked was that some of our best people had left and started a competitor. That seems very logical to a lot of people,” said Bushnell. “Then we floated the rumour that we were suing them for theft of trade secrets. That alsoounded very logical to everybody. A couple of months later we said we had settled the lawsuits and the settlement was we owned a piece of Kee Games.”

  To maintain the pretence Kee Games had its own offices, salespeople and a small game development team, but its main activity was re-releasing Atari games under different names such as Spike – the Kee Games’ version of Rebound . With so many companies copying Atari at the time, few questioned the similarities between the games. “All the Kee Games’ circuit boards were manufactured in the Atari facility. We had our own cabinets and developed our own games, but it was part of the same thing,” said Bristow. The deception worked and soon Kee Games was striking deals with the distributors Atari couldn’t reach. “The distributors swallowed it and Atari was able to bust open the distribution model so that now we were selling to everybody,” said Bristow. Only one person – Joe Robbins of Empire Distributing – saw through the spin, according to Bushnell: “I remember him coming up to me in a trade show and he says: ‘You think you’re so smart, but I know what you did’. He did it in such a way that you knew he had a lot of respect for what we were able to accomplish.”

  Having bypassed the restrictions of the distribution system, Kee Games then provided the big hit Atari needed to repair its finances with Tank , a two-player game where players steered tanks around a mine-infested maze trying to shoot each other. The idea grew out of Bristow’s desire to update Bushnell and Dabney’s first video game, Computer Space . “ Computer Space was a really good fighting game, but many people found it hard to play. The idea of a free-floating spaceship that you had to counter velocity with rotation and counter thrust wasn’t easy,” said Bristow. “As a youth my uncle had put me to work clearing his orchard using a Caterpillar tractor, which drove like a tank. I thought that could be turned into Computer Space done right.”

  Bristow got Lyle Rains, one of Kee Games’ engineers, to turn the idea into a working game. Rains enhanced Bristow’s basic idea by adding a maze littered with deadly mines. Released in November 1974, Tank became the most popular video game since Pong with more than 15,000 sold. With Kee Games now awash with cash, Bushnell used the opportunity to officially merge it with Atari. As part of the deal Keenan became Atari’s new president.

  The profits from Tank repaired Atari’s battered balance sheet and the combination of the two company’s distribution networks gave the reinvigorated Atari unparalleled reach within the coin-op market. It also erased the costs involved in pretending that the two were separate businesses. The timing was fortuitous as Atari was about to launch itself into the consumer electronics business with a version of Pong for the home.

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  The idea to take Pg into people’s living rooms was suggested by Atari engineer Harold Lee. Given the game’s original inspiration – the Magnavox Odyssey games console – the idea to make a home version of Pong was an obvious one, but Lee believed Atari could improve on the Odyssey by using integrated circuits. [3] The Odyssey had been developed in the late 1960s when integrated circuits were far too expensive to use in consumer products. By the start of the 1970s they still remained prohibitively expensive, but had become cheap enough to use in arcade video games such as Pong . Lee, however, believed the cost of integrated circuits would soon fall enough to make a Pong console that could be plugged into home TVs.

  Pong ’s creator Al Alcorn agreed with Lee’s assessment and the pair asked Bushnell to fund the project. Bushnell was sceptical: “The technology was expensive. The integrated circuit boards by themselves cost almost $200, so that was clearly never a consumer product.” Despite Bushnell’s doubts the pair remained convinced the plan would work and set about making a prototype to prove it could be done, with help from Atari engineer Bob Brown. “It was really a skunk works project,” said Bushnell. “We put very little money into it until we were pretty sure we could do it.”
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  With next to no funding the trio spent most of 1974 building a prototype home Pong console that could be sold at an acceptable price point. By late 1974 it was clear Lee’s idea really would work and, most impressively of all, the whole game could be fitted on a single integrated circuit – a breakthrough that drastically reduced the production costs. Atari wanted to manufacture the Pong consoles itself but needed to invest in a bigger and more advanced production line to produce the machines in the quantities needed for the consumer market. Getting the necessary funding for this was proving difficult until Atari sorted out its finances by merging with Kee Games. This in turn helped the company secure $20 million of funding from technology investor Don Valentine, the founder of venture capitalists Sequoia Capital. By early 1975 Atari was ready to start touting its new games machine to retailers.

  But retailers didn’t want Atari’s $99.95 mini- Pong . “We took the first Pong to the toy trade fair and we sold none,” said Bushnell. “The toy stores at the time, their most expensive product was $29 and so the toy channel was closed to us.” Rejected by toy stores, Atari hawked it to the television and hi-fi stores only to find they were also disinterested. Increasingly desperate for retailer support, Atari pitched its home video game to the department store chain Sears Roebuck, the largest retailer in the US at the time. "We called Sears really as a last resort,” said Bushnell. Atari ended up being pointed to the buyer for the company’s sporting goods departments. “The sporting goods department of Sears turns into a ping-pong, pool table type of department around Christmas and it turned out that the year before they had successfully sold out of a home pinball,” said Bushnell. “The buyer said pinbals are in bars, Pong is in bars, this will be a good home recreation thing. “

  It was the break Atari needed. Sears struck an exclusive deal with Atari for the console. Sears would stock the game in its 900 stores and promote it heavily in the run-up to Christmas 1975. In exchange Atari rebranded the game as the Sears Tele-Games Pong and agreed not to release its own Atari-branded version until the new year.

  That Christmas 150,000 Sears Tele-Games Pong consoles flew off the shelves as customers went crazy for the chance to play Pong in their own homes. While the Odyssey had already offered consumers the chance to play video games at home, the arrival of Atari’s console was the moment where millions suddenly realised that video games could be played on their own TV sets as well as in bars and arcades. “It’s the first time people have been able to talk back to their television set, and make it do what they want it to do,” Bushnell told the Wilmington Morning Star . “It gives you a sense of control, whereas before all you could do was sit and watch channels.”

  The console ushered in a second wave of Pong -mania that turned Atari, a near bankrupt business just over a year before, into a household name. And just as with the coin-operated version of Pong , Atari was quickly joined by a stampede of imitators hoping to cash in on the TV games craze. Atari’s competitors were aided by the arrival of General Instruments’ AY-3-8500 microchip. “The AY-3-8500 chip did much the same thing as in the Atari machine, but General Instruments independently developed it,” said Ralph Baer, the creator of the original Odyssey console. “Two guys did it in Glenrothes, Scotland, against the better judgment of management. This General Instruments guy in Long Island, New York, the general manager there, heard about what was going on and told those guys to come over and bring their demo with them. He moved it.”

  The AY-3-8500, and the rival chips that followed, allowed any company to produce a home Pong without having to design an integrated circuit from scratch. Provided they could get hold of the chips that is. The home Pong boom caught the chip manufacturers by surprise and they simply could not produce enough to satisfy demand. Companies such as toy manufacturers Coleco and Magnavox which ordered their chips early received them on time, while the late comers were left in the lurch unable to get their consoles on the shop shelves in time for Christmas 1976, when the excitement about home Pong peaked. Despite the microchip supply problems, millions of people brought home Pong games. By Christmas 1977 there were more than 60 Pong -style consoles on sale around the world and nearly 13 million had been sold in the US alone.

  But the implications of the microchip for video games did not end there. As the mid-1970s turned in the late 1970s, the arrival of a new type of microchip – the microprocessor – would reshape not just the video game business but also the very nature of what and how people played. [4]

  [ 1 ]. Atari did produce several Pong variants of its own, including the four-player Quadrapong and the volleyball-inspired Rebound , where players had to hit the ball over a virtual net.

  [ 2 ]. Bushnell gained full control of Atari shortly after Pong became a success when the company’s other founder Ted Dabney quit in 1973 because he disliked running a large business. Dabney sold his share of Atari to Bushnell for $250,000.

  [ 3 ]. Invented in the late 1950s, integrated circuits – also called microchips – allowed the discrete components that used to form electronic circuits to be shrunk and flattened onto a silicon chip. The result was a massive breakthrough in electronics. Integrated circuits were not only much smaller but were easy to mass produce (the chips could essentially be printed en masse), used less electricity and were more reliable.

  [ 4 ]. Microprocessors are a type of integrated circuit that effectively put the functions of a computer on a single silicon chip. Unlike normal integrated circuits, they could be programmed to perform different functions without any need to redesign the circuit design.

  Computer on a chip: Manufacturing Intel’s 8080 microprocessor. Courtesy of Intel Corporation

  4. Chewing Gum, Bailing Wire And Spit

  Victor Gruen was angry. The 1950s were changing America and the Austrian-born socialist architect believed it was changing for the worst. He felt the growth of car ownership and suburban living was ripping out the heart of society, isolating people communities. But he had an idea that he believed would challenge these economic forces: the shopping mall.

  Drawing inspiration from the covered shopping arcades of European cities, Gruen envisaged a new kind of retail environment – a city centre for the modern world. The shopping mall would, he imagined, bring communities together to shop, socialise and be entertained within an enclosed and climate-controlled building. And in 1954 he gotis chance to put his ideas to the test using the Minneapolis suburb of Edina, Minnesota, as the guinea pig. His Southdale Center mall, which opened in 1956, proved to be the starting gun for a transformation of American cities and towns. Over the next two decades, malls sprung up across the nation ushering in a social and retail revolution as they went. The spread of malls became an unstoppable juggernaut. By the end of 1964 around 7,600 malls had opened across the US. By 1972 that number had almost doubled to 13,174.

  But for Dave Nutting, the proliferation of the mall meant it was time to start over again. After the breakdown of his business partnership with his brother – Bill Nutting of Nutting Associates – he had formed MCI Milwaukee Coin, a manufacturer of electro-mechanical games. But when the company’s investors got wind of how arcade operator Aladdin’s Castle was building an amusements empire on the back of the expansion of shopping malls, they decided MCI should change direction. “MCI was selling direct to Aladdin’s Castle, who were establishing coin-operated arcades in the new shopping malls emerging throughout the country,” said Nutting. “My sales manager said we should do that. We created Red Baron game rooms in 20 locations from Ohio in the east to Phoenix in the west. My investors then decided we should shut down the MCI game manufacturing arm and concentrate on the game rooms.” Nutting, an engineer by trade, decided it was time to go: “Over the years I had become acquainted with the people at Bally Midway and they suggested we work out a consulting relationship. I took my young electronic engineer Jeff Fredriksen and two techs and created Dave Nutting Associates.”

  Shortly after parting ways from MCI, a representative from an up-and-coming technology firm ca
lled Intel invited Nutting and Fredriksen to attend a talk about its latest product. “The rep representing Intel began to tell us about a revolutionary new technology called a microprocessor,” said Nutting. “Intel engineers were travelling the country giving lectures on this new technology. Jeff and I drove down to Chicago and attended one of these lectures.”

  Intel’s product, the 4004, was the first functioning microprocessor and although it could do little more than add and subtract, the potential fired Nutting’s imagination: “I immediately became convinced it was the future of all coin amusement devices. Design one microprocessor hardware system and all games would be created in software.” Nutting quickly set about building a relationship with Intel: “I convinced the Intel marketing person that the microprocessor would revolutionise the coin amusement industry from pinballs to slot machines to video games and that my group was an advanced R&D group for Bally. Our local Intel rep then convinced Intel to send us one of the first 50 development units.” The development unit arrived at Dave Nutting Associates in early 1974. The company used it to build a microprocessor-based pinball machine to persuade Bally to invest further in his company’s exploration of the technology.