The Great Video Game Crash of 1983

When pixelated dreams turned into cheap plastic nightmares, the North American home gaming industry hit the ultimate game over screen.

In the early 1980s, the Atari 2600 reigned supreme in living rooms across North America. However, immense success brought an avalanche of eager companies scrambling for a piece of the digital pie. Following legal battles over third party software development, a flood of unlicensed third party titles overwhelmed store shelves. Every business from dog food manufacturers to shoe retailers seemed to think they could whip up a bestselling cartridge. Without quality control, consumers were greeted by store displays overflowing with bug riddled, unplayable titles that promised high tech excitement but delivered pure frustration.

Nothing illustrated this quality decline better than two infamous releases from Atari itself. In March 1982, Atari released its home port of the arcade hit Pac-Man. Although it sold millions of copies based on name recognition alone, players were treated to flickering ghosts, abysmal sound, and visuals that barely resembled the arcade icon. Then came December 1982 with E.T. the Extra-Terrestrial. Rushed through development in roughly five weeks to meet the holiday rush, the game trapped players in an endless loop of falling into mysterious pits. Both titles became towering symbols of corporate greed and rushed production.

By late 1983, retail shelves were so oversaturated with unwanted plastic that stores panicked and heavily discounted games into bargain bins. Atari was left holding millions of unsold cartridges. In September 1983, the company quietly dispatched trucks packed with surplus inventory to a landfill in Alamogordo, New Mexico. Millions of cartridges, computer hardware, and unsold copies of E.T. were crushed and buried under a layer of concrete. For decades, the story was dismissed as a wild urban legend until April 2014, when a documentary crew excavated the site and unearthed physical evidence of Atari missteps.

The financial fallout from this glut was swift and devastating. Industry records show that North American video game revenue collapsed from roughly 3.2 billion dollars in 1983 to approximately 100 million dollars by 1985. That staggering drop represented a decline of more than 95 percent. Wall Street wrote off video games as a passing fad that had run its natural course. Toy stores refused to stock video game hardware, and former industry giants saw their valuations vaporize almost overnight.

When console gaming seemed destined for extinction, help arrived from across the Pacific Ocean. In October 1985, Nintendo launched the Nintendo Entertainment System, known as the NES, in select North American test markets. Having witnessed the wreckage of the North American crash, Nintendo took extreme precautions. They cleverly marketed the console as an entertainment system bundled with a robot accessory, introduced the Official Nintendo Seal of Quality, and strictly controlled third party software releases. Powered by legendary titles like Super Mario Bros., the NES revived the market and proved that gamers were still eager to play when given quality games.