8 Things You Didn’t Know About the Video Game Crash of 1983

October 16, 2019

The video game crash of 1983 is the stuff of legend. Within two years of the crash, video game sales had fallen a staggering 97 percent, from $3.2 billion to just $100 million. Naysayers said that video games were just a passing fad. The crash very nearly destroyed the industry we love so much.

Then again, if it had never happened, video games as you know them today would be absolutely terrible. So, what caused the video game crash of 1983? What happened afterward? And why is it scarily relevant today? Here’s everything you need to know.

More Supply Than Demand | 8 Things You Didn't Know About the Video Game Crash of 1983 | Gammicks

More Supply Than Demand

You don’t have to be an economic genius to understand supply and demand. The idea is that companies shouldn’t produce more supply than there is consumer demand.

However, Atari never learned this lesson. They sometimes produced more games than there were physical Atari systems. When there were 10 million Atari consoles sold, the company released 12 million copies of Pac-Man and just assumed they would all sell.

Throw in too many game systems and not enough good games, and you get a recipe for disaster. More supply than demand was the kiss of death for a company and for an entire industry.

A Legal Wild West | 8 Things You Didn't Know About the Video Game Crash of 1983 | Gammicks

A Legal Wild West

Modern games enjoy many different legal protections. This keeps people from just copying someone else’s good idea. And even “good guy” companies like Nintendo routinely shut down fan games to protect IP.

In the days of Atari, it was more of a “Wild West,” with nearly no laws or regulations. Not only could anyone make games for the Atari 2600, but programmers could shamelessly steal code and concepts from their competition.

Predictably, this led to a mountain of crappy games and off-brand clones. Consumers didn’t know what was worth buying, and increasingly, they bought nothing at all.

Rise of the PC | 8 Things You Didn't Know About the Video Game Crash of 1983 | Gammicks

Rise of the PC

Modern gamers have a spirited competition between console players and the so-called “PC Master Race.” But would you believe the roots of this cultural divide go back to the video game crash?

While the crash was affecting consoles and arcade games (more on that in a minute), computers and computer games thrived. This was around the time that the average family could afford to bring something like an Apple II or a Commodore 64 into their homes.

So, for the time between the video game crash and the rise of Nintendo, computers were the only way to get a regular stream of new games and gaming innovations. The video game crash helped usher in the rise of PC gaming.

Millions of Unsold Games Were Buried | 8 Things You Didn't Know about the Video Game Crash of 1983 | Gammicks

Millions of Unsold Games Were Buried

Sadly, the video game crash has a face. And it’s one you likely recognize: E.T., the extra-terrestrial, star of the hit Steven Spielberg film.

Video games based on movies have a reputation for being bad. This arguably started with the 1982 Atari 2600 game E.T. the Extra-Terrestrial. Atari made over four million copies of the game. But it was a boring and repetitive disaster.

When only half a million copies sold, Atari took some drastic measures. They ended up burying 3.5 million copies of the game in a New Mexico desert. Many thought this was a crazy urban legend for a long time, but fans dug up many of the games in 2014. It was all documented in the film Atari: Game Over.


Arcades Were Not Immune | 8 Things You Didn't Know About the Video Game Crash of 1983 | Gammicks

Arcades Were Not Immune

In the early ’80s, arcade games and consoles had a symbiotic relationship. The popularity of console gaming helped arcades thrive. When the crash almost killed console gaming, it made arcades less popular. However, arcades ended up benefiting from another basic economic concept: diversification.

As arcades became less of a dominant cultural force, the arcade machines themselves managed to branch out into other venues. You started to see arcade games popping up in bars and bowling alleys. Thus, less traditional audiences became exposed to arcade games. When Nintendo revived the console market in the early ’90s, arcade gaming was poised to make a major comeback.

A New Generation of Gamers | 8 Things You Didn't Know About the Video Game Crash of 1983 | Gammicks

A New Generation of Gamers

We keep talking about the crash and how it nearly ended video games. However, you might be curious as to why almost every gamer of a certain age owned an Atari 2600 or related console.

Call it the “silver lining” of the video game crash. Because of too much supply and not enough demand, vendors everywhere slashed the prices of both consoles and games. This turned something that was once an expensive premium item into something almost anyone could afford.

Thus, the event that nearly ended the gaming industry helped plant the seeds for Nintendo’s success.

Enter the NES | 8 Things You Didn't Know About the Video Game Crash of 1983 | Gammicks

Enter the NES

Make no mistake: gaming as an industry was saved by Nintendo. The arrival of the NES saved the industry, but it might not have happened without some important decisions behind closed doors.

First, Nintendo kept strict control over who made games for the system and what they were (or were not) allowed to do. Over time, this led to their reputation for playing it safe and family-friendly. In the ’80s, though, this was a deliberate decision to keep from saturating the market with crappy titles like Atari did.

And Nintendo avoided any possible association between its system and the Atari. They didn’t call themselves a “game system.” Instead, they were selling an “entertainment system.” Heck, they didn’t even call their cartridges “games.” Instead, they were “Game Paks.”

It seems silly now, but this is how they lured a wary public back to the gaming world.

History Might Repeat Itself | 8 Things You Didn't Know About the Video Game Crash of 1983 | Gammicks

History Might Repeat Itself

The video game crash of 1983 is well in the past. But some people think we might experience another video game crash soon.

First of all, the threat of system saturation looms. Microsoft and Sony and even Nintendo now rush to offer multiple versions of one system during that same system’s lifetime. At the same time, there are newcomers like Google Stadia to contend with.

Secondly, we have game saturation. Platforms like Steam have enabled almost anyone to release a game. However, we don’t always know what is good. This is where Gammicks’ Compare Games feature comes in handy.

And lastly, brick-and-mortar stores like GameStop are on their way out. Put it all together, and our gaming way of life might soon come to an end! At the very least, the video game industry could be in for a big shake-up.

Do you remember the video game crash of 1983? Do you think it will happen again? Sound off in the comments below!

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