Video Game Crash

In 1983, the North American video game market collapsed. Revenues dropped from $3.2 billion to $100 million within two years. Retailers refused to stock games. Publishers folded. Atari buried unsold cartridges in New Mexico. The industry many thought dead would be resurrected by a Japanese playing card company with a grey box called the NES.

Fast facts

• Peak market: $3.2 billion (1983).
• Trough: $100 million (1985).
• Primary cause: Market saturation and quality collapse.
• Recovery: Nintendo’s NES (1985 US launch).

Contributing factors

Factor	Impact
Market flooding	Too many consoles competing
Poor quality	Rushed, terrible games
No curation	Anyone could publish
PC competition	Home computers rising
Retailer exodus	Stores stopped stocking

The E.T. disaster

Aspect	Reality
Development time	5 weeks
Quality	Widely considered unplayable
Sales	Millions returned unsold
Landfill	Cartridges buried in New Mexico
Symbol	Represented industry hubris

Market saturation

Year	Competing consoles
1982	Atari, Coleco, Mattel, others
1983	Dozens of systems, thousands of games

Quality collapse

Problem	Example
Licensed games	Rushed tie-ins
Third-party flooding	No quality control
Copy-cat titles	Identical gameplay
Consumer fatigue	Why buy more?

Industry response

Company	Action
Atari	Mass layoffs, cartridge burial
Mattel	Exit games business
Coleco	Exit games business
Retailers	Declared games a fad

Nintendo’s solution

Strategy	Implementation
Quality control	Seal of Quality
Limited licenses	Third-party restrictions
Positioning	“Entertainment system” not “game”
Pack-in	R.O.B. robot for toy stores

See also

• Nintendo
• Atari
• Nintendo Seal