Hey friend! Did you know that the multi-billion dollar gaming industry almost completely collapsed back in the early 1980s? It‘s true – the North American video game business saw its sales plunge by a staggering 97% between 1982 and 1985. For those of us who can‘t imagine life without games today, it sounds unbelievable.
So how did this happen? And what brought the industry back from the abyss to become the entertainment juggernaut it is now? Grab your favorite retro console and let‘s take a look!
Home Gaming Explodes (1977-1983)
Believe it or not, home video games as we know them today really only started back in 1977. That‘s when the Atari 2600 console made it affordable and accessible for average families to play fun, arcade-quality games from their living room. Hits like Space Invaders drove massive sales growth for several years. Check out this table to see the meteoric rise:
| Year | Top Selling Console | Approx. Sales |
|---|---|---|
| 1977 | Atari 2600 | 250,000 units |
| 1978 | Atari 2600 | 800,000 units |
| 1979 | Atari 2600 | 1,700,000 units |
| 1980 | Atari 2600 | 2,400,000 units |
| 1981 | Atari 2600 | 4,000,000 units |
| 1982 | Atari 2600 | 6,000,000 units |
With demand seeming endless, the wider industry exploded too. Total video game revenues in the U.S. went from just $198 million in 1977 to a staggering $3.2 billion by 1982!
Now why was the Atari 2600 so popular early on? Arcade ports! Being able to play the hottest arcade titles like Pac-Man, Asteroids and Centipede at home was every kid‘s dream – and drove huge console demand. Gaming was becoming a true cultural phenomenon and social experience enjoyed by 30% of American households.
But the market would hit an ugly breaking point the very next year in what‘s now known as…
The Crash of 1983
So what happened to turn video gaming from a runaway success into a catastrophic business failure from 1983 to 1985? Several negative factors converged at once:
Hardware oversaturation – By 1983 there was an overwhelming number of consoles to choose from including new players ColecoVision and Mattel Intellivision nibbling at Atari‘s market lead. There would be a new-record 12 different choices released that year!
Software glut – The number of game cartridges on shelves exploded too – from just 33 titles in 1978 to an astonishing 714 new releases in 1983 based on market research figures.
Check out this graph showing the huge spike:
Lack of exclusivity – Unlike today where big games release on just one console, back then the most popular titles appeared across almost ALL platforms. Out of the 25 best-selling games of 1983, only 7 were exclusives!
Poor quality control – With such a flood of new games, development budgets got slashed. Testing and playtime suffered. By some estimates up to 20-30% of games released had serious bugs or glitches. No wonder there was buyer remorse!
Loss of consumer confidence – Burnt too many times by subpar games and confusing choices, the retail video game market collapsed. Revenues dropped a staggering 97% over just three years – plunging from $3.2 billion to just $100 million annually by 1985.
The results were devastating, including titans like Atari posting huge losses. Developers went under. Retailers were stuck with mountains of unsold and returned merchandise. Was this the end of the home video game industry?
Saved by Nintendo!
Well I‘ve got good news – the console market did eventually bounce back thanks to our friend Nintendo! But it wasn‘t smooth sailing. The early-mid 80s saw American gamers move to home computers for quality titles the NES later matched.
Once released in 1985, strong first-party games like Super Mario, Zelda and Metroid helped rebuild trust. Limiting third-parties to just 5 game releases annually ensured only solid titles came out too. This was a vastly different approach than Atari‘s "anything goes" style.
Check out the best-reviewed NES games of all time based on retro gaming site ratings:
| Title | Genre | Rating |
|---|---|---|
| Super Mario Bros. 3 | Platformer | 9.5 |
| The Legend of Zelda | Adventure | 9.4 |
| Super Mario Bros. | Platformer | 9.3 |
| Metroid | Adventure | 9.1 |
| Mega Man 2 | Action | 9.0 |
Slowly but surely Nintendo won back gamers still feeling the burn from the Crash of 83. Combined with new rivals like the Sega Genesis, by 1990 total gaming revenues bounced back to over $5 billion annually. The crisis was over, and the modern console industry began its incredible trajectory leading up to today.
Lasting Changes from the Crash
It‘s safe to say the Crash of 1983 still guides the the video game business even now in 2022 and beyond. Practices around game quality, testing and managing release timing stem directly from the problems back then.
No company wants to see their newly-released console gather dust on store shelves instead of flying off them like the early 1980s. So measures introduced by Nintendo and carefully followed since have kept bad games and buyer disillusion to a minimum.
Case in point – the average review score of console games today according to Metacritic sits between 70-80% across all platforms. Not too shabby! So while another industry-wide crash can never be fully ruled out, fans like us can probably rest easy thanks to the lessons learned from 1983.
Now enough boring history – time to game! What‘s your favorite retro console? I‘d love to hear about it! Just reply to me with what you think. Have an awesome day!
