What is ‘the video game crash of 1983’

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Man stands with hand on head in front of arcade machine

The video games industry is a fascinating one. Even if you’re not in the least bit interested in gaming, the technological advancements made over the last 20-30 years have been bigger and bolder than most other sectors. 

While the majority of banking lags behind sitting on its 80s styled legacy systems and the car industry is still yet to fulfil its promise on EV being not only widely affordable, but also reliable, the gaming industry is jumping headlong into the newest and most interesting areas of tech…and thriving.

Admittedly some of these advancements are yet to be perfected but they’re there and available at all price points for all wallet sizes. Artificial intelligence and virtual reality are just some of the awesome bits of tech compatible with both the larger and smaller titles.

If you’re fortunate to have the opportunity to try them out they serve as only a sniff at what gaming has in store for us in the near future. Buckle up, it’s going to be fun ride…

Most of us will be all too familiar with the various stock market crashes throughout history.

All the way as far back as the Dutch Tulip crash in the 17th Century right through to the housing market crash of 2008, inflated markets and dubious bond selling have caused shockwaves across the globe’s financial frameworks.

But there are also examples of this sort of spiralling behaviour in very specific industries sometimes almost leading them to complete ruin.

Despite the success over the last 20 years, this is almost exactly what happened to the video games industry in the early/ mid 80s.

Today I’ll be looking at the North American video game crash of 1983 and how it almost resulted in the end of one of our favourite pastimes.


A very brief history

Nowadays it’s hard to imagine a world where video games didn’t exist or weren’t the media entertainment powerhouses they are today.

But back 1950s and 60s ‘video games’, or ‘simulations’, were merely being used by professors and students of universities as part of their research into the field of computer science or to tinker with in their free time at home.

It wasn’t until the 70s and 80s that the principles of these games were brought into the consumer mainstream in the form of arcade machines and home consoles – the most famous iteration being Pong, the 2D tennis-esque game created by Nolan Bushnell and Ted Dabney who would go on to found one of the first dedicated game development companies: Atari.

And with this, the home console market would experience a boom like never before.

Atari were by no means the only company involved in the early business of home consoles and games – Coleco and Mattel were two other companies also kicking about – but were the largest at the time, and were one of the main players in the inflated market that the games industry would soon become.


The 4 key catalysts for the collapse

1. Market saturation

Spurred on by the success of Atari’s Space Invaders – the first home console title to sell a million copies – many new companies started to spring up and began filling the market with their own made games as well as those made by third parties.

This rapid growth caused companies and manufacturers to wildly over-project the demand for these home entertainment systems. The industry was in the midst of a quick boom, but not as much as was being predicted.

Some predictions from analysts estimated that manufacturing was outstripping demand by as much as 75% creating a considerable surplus and leaving a lot product left sat on shelves.

Even dog food producers were getting in on the act. If consumers sent in proofs of purchase to Purina, they could get their hands on a copy of ‘Chase the Chuck Wagon’.

Quaker Oats also had their own game by the name of ‘Sneak’n Peek’, a hide and seek styled game that relied on the friend you were playing with to close their eyes so they wouldn’t cheat and see where you’d hidden your character.

Home console games would go on to fill the bargain bins in media stores where they’d once been retailed at $30-40, but were now left lying at just 10% of their original value.

2. A loss in confidence

With developers rushing to release their newest game as quickly as possible in order to capitalise on the boom, games were being released with increasingly lower quality control measures causing many consumers to become disillusioned with what the industry was creating.

One notable example is the 1981 release of Pacman. After the Lead Developer, Ted Frye, showed the Atari board a prototype of the game, the company decided to publish the incomplete version for fear of missing the holiday season of that year.

Here was the result:

The game was an unmitigated disaster for the company leaving them with 5 million unsold copies and is to this day frequently cited as the worst game of all time.

Another notable high profile example came in the form of the movie game, E.T. After the huge success of the film in 1982, Atari were instructed by their parent company, Warner Communications, to get a game version of the film released by Christmas…in mid November.

This gave Atari just 6 weeks to produce a brand new game from scratch and the result was, well…see for yourself:

Even Ray Kassar, head of Atari at the time, was quoted as saying, ‘It was a disaster […] nobody liked the game’.

Almost all the 5 million copies produced were returned and ended up in a landfill in a Mexican desert buried under mounds of concrete.

Atari would go on to lose over $500million by the end of 1983.

These are just two high profile examples from the game industry’s biggest company at the time, but there were hundreds of such examples from smaller players who were less able to absorb such financial and commercial failures.

These rushed out, half-arsed games were further saturating an already over inflated market.

3. Cheaper computers

By 1982, desktop computers were outperforming games consoles in almost every way; better graphics, sound design, memory and faster processing power all contributed to producing better quality games that could be distributed and sold a lot easier on floppy disks and compact cassettes, rather than the bulkier cartridges of home consoles games.

Desktops also had the added advantage of doubling up to help with non-game related tasks such as accounting and word processing, while still retailing at a competitive price point to their solely video game focused competitors.

Consumers quickly began to question why they’d purchase a games console over a desktop system that could do everything a console could do and more and so slowly began to crawl further and further from the top of everyone’s Christmas list to Santa.

4. Publishing control

Atari saw a number of their lead developers and programmers leave owing to them not receiving credit on the games they were producing. They would leave to go on to found Activision – a company still around today and credited for the publication of some of gamings most well-known and successful titles such as, Call of Duty, Crash Bandicoot and Spyro.

Many other such third party publication companies started to pop up, putting their games on shelves in vast quantities.

All games nowadays are controlled by the console manufacturer. Nothing is created for the Nintendo Switch, PS4 or Xbox One without the ‘ok’ from Nintendo, Sony or Microsoft.

Every game produced for one, or all, of these consoles will always have the console logo at the top and/or on the side of the box so consumers can determine which of these games is compatible with which system and for manufacturers to control what can and cannot be played on their systems.



It sounds obvious to us now but this is exactly what wasn’t happening back in the early 80s with the majority of games.

When the publisher loses control of what games can be played on their consoles, the market gets flooded with titles they’d probably rather not be representing their consoles.

With this influx of games being produced, quality suffered. Analysts predicted that in 1983 just 10% of games were making up over 75% of the sales.

The aftermath

Ideas for new games had ground to a halt and when stores began trying to return the thousands of unsold games, the small-time publishers had neither the new content nor the cash to fulfil the retailers demands.

Confidence in the industry sunk to an all-time low and retailers stopped purchasing games from publishers and began dedicating less and less of their floor space to products that saw increasingly reduced demand from disinterested consumers.

With the severe decrease in demand, there was less incentive for publishers to come up with new titles as they knew they wouldn’t sell, and so the vicious cycle would continue.

The crash had a far-reaching effect on the US dominance in this industry, with Japan beginning to hoover up market share with the release of Nintendo’s Famicon.

When the console was eventually released in the US in 1985 – two years after the Famicon in Japan – Nintendo used the name Entertainment System (NES) rather than ‘games console’ which still had negative connotations around ‘that which lacks quality’.

This was one of the reasons Nintendo introduced accessories such as the Duck Hunt gun and R.O.B into their newer titles. It gave the impression that they weren’t just a gaming company but were also a toy company and their products could be used not just for gaming but for imaginative play also.

The market was fairly quick to bounce in the grand scheme of things, but saw the value of the video game market fall drastically between 1982 and 1985 by almost 70%.

Despite causing the near complete collapse of the industry in the West, the crash gave way to changes that are still implemented to this day.

On the release of the NES (Nintendo Entertainment System), Nintendo introduced strict licensing policies to prevent piracy and low quality games ending up on their consoles, along with regional lockout chips embedded in the cartridges that resulted in games only being able to be played on region specific consoles (Japanese games on Japanese consoles; US games on US consoles). They would also restrict the amount of games third party publishers could make per year to five.

The industry would go on to recover and three decades on is now worth over $180billion (2018). With the technological advancements gaming is making, along with its ever increasing and loyal fanbase, I can only see this going up and up and up.

But no industry should ever get too cocky. With gaming tech able now to transfer you into your games through virtual reality or massive online arenas allowing gamers to compete in their droves, all at the same time, from across the world, it really does beg the question…

…where do we go from here?








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4 thoughts on “What is ‘the video game crash of 1983’

  1. Thanks AMM

    This was very interesting as the crash was not something I was aware of.

    I have my Dad to thank for my interest in gaming – we had the original Pong and also an Atari console (Asteroids I think was my favourite game!). I recall hours spent on my cousin’s NES (playing original Super Mario Bros). Outside of home, I spent all my pocket money playing Space Invaders, Pacman and Galaxian. In my teens/early 20s, I was a regular at arcades, pouring my money into gaming machines.

    The last console I owned was the original Playstation (PS1), which is still somewhere in the house gathering dust! My gaming these past 15 or so years have been on the PC.

    Liked by 2 people

    1. It seems to be quite an unknown even amongst gamers (I had no idea either until I started researching it).

      I’m super jealous I grew up when arcade halls were out of fashion…I’d love to have experienced them. It’s partly one of the big reasons I want to visit Japan as they’re full of them still! Plus all the retro kit you can get your hands on.

      I’ve never really played on a PC – only a little of the first World of Warcraft and a few other point and click games. The PS1 was a solid console…they have just released more information on the PS5 coming out next year so maybe you can kickstart console gaming again 🙂

      Liked by 2 people

    1. Wow! What a great idea…I’ve always loved the idea of ‘Bang Bars’ in Japan (not as seedy as they initially sound in English). They’re giant arcade halls but with bars you can buy a few beers at and make a proper evening of it.

      Unfortunately it doesn’t look like anything like that really exists near me, but I’d be happy to travel for something like that. You’ll have to let me know how it is with you nephew once we’re allowed to do those sorts of things again 🙂

      Liked by 1 person

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