Replay: The History of Video Games (10 page)

Invasion of the coin snatchers: A
Space Invaders
contest. Courtesy of Funspot

6. High-Strung Prima Donnas

Stella was a bicycle. The bicycle owned by Atari engineer Joe Decuir to be precise. It was also the codename of what was Atari’s most important project at the start of 1976: a new form of home game console. Unlike the home
Pong
console that took the world by storm in Christmas 1975, this new console would harness the flexibility of the microprocessor to allow it to play a whole range of games. And instead of these games being built into the machine, they would be sold separately on memory chips housed in plastic cartridges that could be plugged in whenever people wanted to play a different game.

Atari figured that such a system would be a great money spinner even if they sold it for little or no profit, because once people bought the console, they would be more likely to buy game cartridges rather than a new machine when they tired of the games they owned. And since these cartridges cost a few dollars to make but could be sold for $30, Atari stood to make enormous profits if it could get enough of its consoles, which it later named the VCS 2600, into people’s homes. But progress on Stella was slow, hampered by Atari’s tight finances. Home
Pong
may have made Atari millions, but these profits were rapidly eaten up by expansion and the development of new products. “One of Atari’s weaknesses was it was primarily self-financed,” said Steve Bristow, the company’s vice-president of engineering. “Most of the money it made came from selling products, which it then spent making the next product. There wasn’t a pool of capital. There were times when it was practically cheque-to-cheque and there would be a race out of the parking lot to make sure your pay cheque would get cashed.”

Atari founder Nolan Bushnell was well aware of the problem: “We were getting ready to do the 2600, which required a lot of cash and we just didn’t have a lot of cash.” The company toyed with the idea of floating on the stock market, but backtracked after deciding that the depressed market wouldn’t bring in the kind of money needed. Then as it started examining alternatives, Atari received the news it feared most: another company had come up with exactly the same idea and was close to launching its system.

That company was Fairchild Semiconductor, a Silicon Valley electronics component manufacturer had intended to use its new F8 microprocessor as the basis of its console: the Fairchild Channel F. Fairchild had given the task of creating the Channel F to Jerry Lawson, an African-American field applications engineer for the firm who had already made a microprocessor-based coin-op video game. “Fairchild wanted to start a new concept – field application engineers, people who were able to help its customers with design in the field. I was hired as the first field application engineer,” said Lawson. “At that time the microprocessor came and reared its ugly head. I said the microprocessor is a great tool to be used for displays, but everyone said: ‘Oh no, it’s too slow’. To prove my case I came up with a design concept to build a video game.”

Using Fairchild’s F8 microprocessor, which launched in 1975, Lawson created
Demolition Derby
, an overview driving game that foreshadowed the action of the non-microprocessor coin-op
Death Race
. “You drove cars around the track and the cars crashed into each other. It was later changed to be called
Death Race
. Instead of hitting cars you hit people and a tombstone popped up. That’s how grotesque people get to be when they want to.”

Laws
on sold his game to a company called Major Manufacturing who tested it out on the customers of a pizza parlour in Campbell, California.
[1]
“Fairchild heard I was doing it and said ‘look we have a concept: we’d like to go into games ourselves’,” said Lawson.

Like many other microchip manufacturers in the 1970s, Fairchild had decided to move into the consumer electronics market. “The semiconductor industry would put more and more into an integrated circuit and, when you do that, you get to a point where the only thing that’s left to do is put power into it,” said Lawson. “They finally went ‘to heck with this’. Why should they do all this engineering, all this development, so someone else can turn around and put it in a case?”

Lawson became the director of Fairchild’s new video game division and set about designing a console based on the F8 microprocessor. The idea of a home games console that could play different games wasn’t new. The Magnavox Odyssey, the first home video game machine, let people play different games by inserting different circuit boards. But the technology in Odyssey was nearly five years old when it was released in 1972 and required players to attach overlays to their TV screens to enhance the limited graphics. Lawson’s colour video game console needed no such add-ons.

Fairchild launched the $169.95 Channel F in August 1976 with two
Pong
-type games built in and a selection of $19.95 game cartridges to buy separately, including a
Tank
clone called
Desert Fox
and the self-explanatory
Video Blackjack
. The idea of interchangeable game cartridges, or videocarts as Fairchild called them, took some explaining to a public still getting used to the concept of home video games. “There’s an event that takes place the day after Christmas that the retailers call ‘Hell Day’,” said Lawson. “That’s when people bring back all these wonderful gifts that they can’t do what they want to do with or don’t understand. I made the mistake of coming in the day after Christmas 1976 and our marketing department were on vacation. The phones started ringing. The security guard, he’s getting calls left and right.”

Soon L
awson’s phone jammed with people struggling to operate their Channel F. “People thought it was an eight-track tape player but an eight-track tape wouldn’t fit, so they tried to jam it in there,” said Lawson.
[2]
“One woman called up about grandpa’s teeth being stuck in the cartridge chute. Another said: ‘Urine hurt the game’. Rover had lifted his leg and peed on it. One guy called me and said: ‘I can’t find the batteries’. I went: ‘It plugs into the wall. What do you mean batteries?’ He’d taken it apart because he couldn’t find the batteries. By the end of the day, I was so frustrated that a woman called up and said ‘My game hums. Do you know why?’ and I said: ‘Because it don’t know the words, lady’.”
[3]

Fairchild did not have the market to itself for long, however. Shortly after the Channel F reached the shops, TV set manufacturer RCA announced it was going to release its own cartridge-based console in early 1977: the RCA Studio II. Atari knew it was only a matter of time before other rivals appeared. Suddenly the company that had always led the way on video games faced being left behind. With the clock ticking, Bushnell and Atari president Joe Keenan put Atari up for sale, hoping to find a large parent company that could bankroll the 2600.

The news that Atari was up for sale soon reached the New York City headquarters of Warner Communications, a large entertainment conglomerate that had a strong presence in the music, film and comics business. “I got a phone call from one of our large institutional investors,” said Manny Gerard, the Warner executive in charge of new acquisitions at the time. “He said something like ‘would you be interested in a technology-based entertainment company?’. The words sounded right so I said yes. I didn’t know what I was saying yes to, but the description fitted us. Next thing I know I’m going to Los Gatos, California, and I’m taken to this company called Atari.” During his visit to Atari, Gerard got a glimpse of Stella, the 2600 prototype. “I wrote an internal memo saying ‘I have seen the future and it was called Stella’,” he said. “When I saw it – a programmable video game – I said ‘oh yeah, this is a big deal’.”

Warner decided to buy Atari and in October 1976 paid $28 million for the company, turning Bushnell into a multi-millionaire in the process. Bushnell was excited by the deal. Warner were prepared to spend the millions needed to get the 2600 into people’s homes and the daily cash flow battles that he had been fighting ever since forming Atari were finally over. On top of that his initial worries about the competition were easing. “When I first heard Fairchild was doing this thing it scared me. Then when I saw what they had done I thought these guys are clueless,” said Bushnell. Trip Hawkins, a young Harvard graduate hired by Fairchild to carry out market research on the Channel F, had come to the same conclusion. “Fairchild was a semiconductor company,” he said. “In the ’70s those companies, including Hewlett-Packard and National Semiconductor, all got into manufacturing consumer products that would use their chips – calculators, watches,
Pong
games, etc. Fairchild didn’t really understand consumer product development or marketing and they certainly did not understand games. They had no concrete commitment to being in the games business, whereas Atari was founded to be a games company.”

Lawson agreed: “The problem was Fairchild still had a component brain, not a systems brain. They always thought themselves more important because they developed the circuit, but to a systems guy like I was, it doesn’t make a difference to me who develops that little chip. I couldn’t care less. But they didn’t understand that because they were coming from a different end of the spectrum. As a result, they didn’t understand marketing when it came to dealing with end customers. Their customers were manufacturers – the Honeywells, the IBMs – they’d never had to deal with an end customer.”

And when RCA revealed its console would only do black and white visuals, but would cost only $20 less than the Channel F, Atari’s confidence grew even more. Atari had Warner’s money and a collection of hit arcade games that its rivals could only dream of. By the time Atari launched the $199 VCS 2600 in October 1977 with
Combat
, an in-built version of its arcade hit
Tank
, its competitors were floundering. RCA’s black and white console had bombed and Fairchild’s Channel F had failed to win over a large audience. But even though the opposition crumbled, sales of the 2600 in Christmas 1977 were a disappointment. Manufacturing delays meant few of the consoles reached the shelves in time for Christmas and only a few hundred thousand 2600s had been sold by early 1978 despite the millions Warner lavished on the system. “We missed the Christmas season,” said Bushnell. “We were late in producing units and then there were some huge snowstorms that stopped us getting past the Sierra mountains. As a result we ended up not having enough at Christmas and too many in January and February.”

Matters were not helped by the excitement surrounding a new type of video game: the handheld electronic game. In 1977 it was these, not the new generation of video game consoles, that were topping Christmas lists across the US. Toy company Mattel kickstarted the handheld games craze in 1976 when one of its marketing directors – Michael Katz – came up with the idea for a portable electronic game. “It was the mid-’70s – a time when pocket calculators were a new product and were getting smaller and smaller and less expensive,” said Katz. "Everyone had to have a little handheld calculator. I said to Richard Channing, Mattel’s director of preliminary design: ‘Can you design a new type of game that uses LED technology similar to that in a calculator but that could be portable, battery powered and the size of a handheld calculator?’ He went away and came back with the prototype of what was the first handheld game – an obstacle avoidance game where LEDs were coming down at you. You were at the bottom of the screen and had to try and avoid them and make your way to the top.”

Excited by their invention, Katz and Channing developed two prototypes games – one based on American football, the other on motor racing. After gauging reaction from consumers, Mattel decided to launch the racing game,
Auto Race
, first and began touting the product to stores. The retailers loved it. “It was incredible because a lot of them would have managers of all levels come to our presentations, which wasn’t normal when you were presenting a toy product,” said Katz. “They wanted to see what the first portable electronic game looked like.”

Children were just as excited at the opportunity to play video games wherever they went and hundreds of thousands of
="rgb(0, 0, 0)">Auto Race
games were sold during Christmas 1976. The following June, Mattel released
Football
to even greater success. Millions of
Football
games flew off the shop shelves and the company’s new Mattel Electronics division quickly became a significant part of the toy giant’s business. The excitement about portable games showed little sign of stopping for the next two years as dozens of companies sought to grab a slice of the action.