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

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

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

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.