Original subtitles

[ominous music]

[electronic music]

I think the term hacker started out in chess for

some chess player who's enthusiastic, but not very good.

Cambridge, Massachusetts, 1961: hackers are invented at MIT.

it sort of evolved to mean somebody who

was playing around with

something like a computer or electronics,

someone who wasn't focused on a nice, big, important project,

but was just fiddling around.

A hacker may have been the ultimate weapon developed

at MIT during the Cold War,

and they completely lost control over it.

Early on, the Tech Model Railroad Club

was a group of geeks at MIT.

When they discovered computers,

they became very interested in computers.

Hackers were as competitive and cocky

as any other college student.

Everyone was an engineer or wanted to be one;

people liked to speculate on how to solve problems

and how to solve problems really well.

When a hacker dreams of another world,

he is likely to make it real.

As an early geek, he was very involved in science fiction

I had a program that displayed two space ships,

and to make things interesting

they could fire torpedoes as well as accelerate

and the torpedoes would blow up torpedoes and other space ships.

Immerging yourself in another world was

the start of a long-lasting fascination.

If you could imagine an engineering student in the 60s

going over to the engineering building

in the middle of the night

and confronting a magical display with moving objects

and a game, and being totally mesmerized,

flabbergasted, enchanted,

that was my experience with Steve Russell's Space War.

I could not imagine a more

compelling, wonderful game experience

at that point in time, and it profoundly changed my life.

When fascination meets ambition,

then comes the Silicon Valley archetype.

After I graduated from college

I determined that someday I was going to

build a video game for the masses.

Young Bushnell instinctively felt

there was something hot in this idea.

Nolan Bushnell was a young engineer from Utah,

of the Mormon faith.

When he was at the University of Utah he saw

the first Space War game on a PDP1.

I didn't really pursue it commercially until

after I graduated.

He worked at an amusement park in Salt Lake City,

so he understood coin-operated business.

Nolan Bushnell was not really a hacker,

nor he was merely a dreamer.

He had salesmanship. He had charisma.

He was tall and he was handsome and he was witty

and he could talk a million miles an hour.

The amusement park was not known

as a place that paid a lot of money,

but it was summer in Utah,

girls would come down there, it was a fun job.

I became manager of the whole department.

Nolan Bushnell was, from the very start,

someone hard to be put in a box.

My business mindset really came from a very young age

and it had to do with ham radio.

I decided, literally at 10 years old,

to make adult kinds of money.

Will this early inclination turn into a real business ability?

Nolan Bushnell was a visionary.

Nolan Bushnell was somebody

people wanted to line up and follow.

Business wasn't really his strength.

Nolan Bushnell's strength was in recognizing

something that is neat.

Neat was his word.

Who was Nolan Bushnell according to himself?

I loved technology and things

but I also decided that I wanted to be popular,

and so, for some reason,

I always had an ability to sort of reinvent myself,

I can remember the day I sold my

ham radio transmitter to buy a pair of skis,

you know, which represented kind of a transition in mindset.

But Nolan Bushnell also was a conscious gambler.

I also learned how to spend a lot of money.

For the first three years of college

when I do my budget I would have poker winnings as a line item.

The problem with being good at poker

is that no matter how good you are

there's somebody out there that's better

I was better than all of my fraternity brothers

but I was not better than this one guy

that came down and picked me cleaner than a Christmas goose.

By 1969, Nolan Bushnell looked like he had settled down.

You really learn how to be an engineer your

first year on the job.

Without that first year and a half at Ampex

I don't believe that my approach to

the video game would've been at all the same.

Truth is that the gambler was waiting for another bet.

He actually formed a

club inside of Ampex to invest in the stock market.

Back in those days, individuals didn't invest in the market.

Establishing my own company

and quitting was a whole different thing.

Al Alcorn entered Ampex at nineteen

while Nolan was enticing Ted Dabney into some venture of his.

Ted and I, who was my office mate at Ampex,

were talking about this video game.

Making a coin-operated entertainment device

using a computer.

Nolan was still so impressed by the Space War game

that he copycatted it.

He had designed a game in his own time called Computer Space.

Ted said "Yeah, sounds great, let's do it!"

Nolan thought he was going to have to have

once central computer

and maybe run 10 or 20 games but the economics didn't make sense.

Even mini computers were too expensive.

His first, and fairly academic, approach

wasn't sustainable at all.

He's decided he's gonna try and find a way to

make it something that could be marketable.

Displays at that time were 25,000 dollars,

and I said "Shucks, I can buy a

consumer television set for 100 bucks."

Nolan discovered that computational sustainability

was also an issue.

I was just doing this all in calculations and on paper,

and I had to keep adding functionality to the hardware

to relieve the burden on the minicomputer,

and finally I said this computer is too slow.

And then I had what they called an "Aha!" moment

where I said, "Get rid of the computer,

I'll do it all on hardware."

If you wanted an object on the screen

you had to put some chips into it.

Finally, Space War was going to be a viable arcade game.

Nolan Bushnell was obsessed with getting ahead in life.

When he saw Computer Space or Space War he said,

"You know what, this is new, this is great.

I see it before everyone else does.

I'm gonna ride this wave."

The money-making mindset of Mr. Bushnell

started to work harder than ever.

We started the company with 250 dollars each,

Ted Dabney and myself. We chose Syzygy because

we thought it was a cool name.

We pulled it right out of the dictionary.

Syzygy means an alignment of planets in a solar system.

Even in those early days, Nolan was paving the way

for one of the Silicon Valley evergreen.

He immediately evicts his daughter, Britta,

from her bedroom, and that becomes his workshop.

And cute little Britta gets to sleep in the living room.

I pitched it to Nutting Associates,

who said, "Yeah, I will put this into production,

but also would you come and be our chief engineer?"

People around him didn't get

his new entrepreneurial style at first.

In about 1971,

he resigned from Ampex

to go work with a company called Nutting Associates.

We felt sorry for him.

Computer Space was the ultimate space age thing.

He chose to use a fibreglass cabinet,

very sculpted looking. At the time, modern.

Fortunately for Nolan,

he never sold many of the Computer Spaces.

You can only make one cabinet a day from a tool, from a mould,

so it would be very hard to scale up.

But most of all,

Computer Space was a great learning opportunity.

They put it in a bar called The Dutch Goose.

It did OK because at the Dutch Goose you had geeks.

The early Space War game that ran on the PDP1

was done for computer scientists by computer scientists.

Could a game with such a steep learning curve

be a national success?

Computer Space didn't succeed

in retrospect because it was too complicated a game.

It took a special amount of knowledge of action and reaction

and the way objects operate in free space,

a little bit of knowledge of Newton's second law,

things like that.

It was not a game for the average working-class guy.

They just didn't know what was going on.

And so it did extremely well around college campuses,

did no money at all in a working-class neighbourhood.

Computer Space proved there was a market out there

for video games.

People have said that

Computer Space was a failure - it really wasn't.

It, you know, did about 3 million dollars in sales,

which, you know, not bad.

He immediately doesn't get along very well with his bosses there.

I thought that as I got to know Nutting,

they were not a very clever company.

That became a pattern with Nolan.

He was a great leader, maybe not as much of a follower.

I grew up in San Francisco.

My neighbour, when we were living in the Haight-Ashbury,

had a TV repair shop.

Al Alcorn was the result of putting a typical nerd

in a hippie environment.

I wound up at Cal, University of California, Berkeley.

Now, that was during the 60s. I was very much involved in

all of that stuff too in Berkeley.

Counter culture and technology

were the explosive mixture that made Silicon Valley.

Silicon Valley had started to build its reputation as a

sort of centre of good technology,

and so I felt that it was important to kind of be

at the hub of where things were happening.

Ampex, along with Hewlett Packard and Fairchild,

were the cradle of that new breed.

So in June of 1972 I was working at Ampex

and that is where I met Nolan Bushnell and many other people

that became the core team of Atari.

I thought that he was a brilliant engineer,

and a really good

technologist and so he was my first choice for hire.

Computer Space had made some money for Syzygy,

but nowhere near to Nolan's expectations.

The incompetence of Nutting

gave me the encouragement to say,

"Hey, I couldn't mess it up more than these bozos."

[laughs]

Syzygy was already in use so we had to choose another name

and we chose Atari.

Nolan Bushnell, the Silicon Valley entrepreneur,

went for his first hiring.

He offered me a thousand dollar a month salary,

which was less than I was making at Ampex,

and he offered me stock in the company,

which I considered to be worthless.

What was convincing Alcorn was the new company spirit.

We were young and we had an attitude that,

hey, if we took this chance it would be fun.

Nolan gut was telling him they were going to be big.

Nolan kept telling me, oh, we're going to be a

million dollar company. I thought he was crazy.

[laughs]

it would fail in a year or two.

I'd go back to Ampex and everything

would be fine and I'd actually learned a lot.

A new kind of workplace was taking shape,

a kind which was going to be very popular.

At Ampex you showed up at 8 o'clock in the morning,

you left at 5 o'clock in the evening,

you had a one hour lunch.

You didn't wear blue jeans, you dressed in slacks,

and a white shirt, maybe a tie,

maybe you wore a lab coat.

You stayed there your whole life, and you got

a gold watch, you got retirement and a pension.

I was from Berkeley, I mean...

It was pretty clear what was going on,

at least in Nolan's mind.

We decided that we were going to have a New Age company,

a company of the Age of Aquarius where

employees were going to be treated as human beings.

And we were going to be focused on results, not process.

We were going to build a product and

the product would speak for itself.

We had a very, very flat organization structure,

way before it was fashionable.

Today everybody wants to start a company,

but back then it just wasn't done.

Ralph Bear is a fascinating man.

Largely self-educated,

but with some education in radio technology,

and became the quintessential inventor.

Ralph Baer had nothing to do with the Age of Aquarius.

I had the initial concept of doing something interactive

it was just a matter of putting patterns up there,

manipulating patterns, moving them around.

In 1966 he was heading 500 people at Sanders,

a giant military contractor.

One day he's at a bus station and he sees a TV and he thinks,

"Oh my gosh what can you do with a TV

besides just watch lame shows on it?"

I wrote a four page paper on September 1st

of '66, that lays it all out.

It describes lots of different games

and the interaction between a game and the television set

and some of the technology.

He had no issue in putting someone on the job.

I took a technician, put him in a second room,

and let him work on something.

Basically I was asked, questions like, "Are you still

screwing around with this stuff?"

That is the kind of support I got.

[laughs]

The hardest task was finding a manufacturer

to sell this idea to.

We had RCV, Motorola, Magnavox,

many others, producing television sets,

and they all said it was great,

except nobody did anything except Magnavox

Out of that came the Magnavox Odyssey game

which first came out and was sold publicly of May 1972.

Odyssey came out in the same days in which

Al Alcorn was stepping in.

We had gotten a contract

with Bally Manufacturing to build a driving game,

but I felt that that was too difficult of a problem

to have Al start to work on.

Somebody had said there's a video game

being showed in Burlingame,

and I thought, "Oh boy, I've got competition.

The video game business was ours!"

There's a lot of controversy over who was

the real father of Pong.

I went into the Magnavox

demonstration lab and there was Odyssey.

I'll show you.

I said well, there's no competition here,

so I went back and that was actually the

first day that Al Alcorn showed up.

Pay attention.

While staring at Odyssey,

Nolan started to frame some basic aspects of video gaming.

The striking of the ball had no offensive aspect to it,

it was simply blocking it,

which is ultimately boring.

It's not that fast.

The motion in general was not crisp,

there was no sound, there was no score.

I said, you know, if I were going to do

a game like that, this is how I'd do it.

Eventually, Nolan showed another key element

of the Silicon Valley way: ruthlessness.

People say, oh I shouldn't do that

because someone else may have patented it or something.

Unless you are directly stealing somebody else's concept,

go for it and resolve it later. That's what we did.

The gentlemen's disagreement that started with Pong

had grown to include the very concept of the video game.

It was a totally different

architecture, different approach.

The only similarity was a

moving spot on a cathode ray tube.

Whether video games are produced technically

by one form of technology or another

is totally irrelevant.

There is no question that I am the original inventor

of home games.

The record is clear. There is a four page document.

On the other hand, Bushnell and associates,

like Al Alcorn, Ted Debney, Steve Bristow and others,

were basically inspired by Nolan to do what?

To put a coin slot on the Space War game.

Bushnell tends to see the broader picture.

The reality is that Pong was successful and Odyssey wasn't.

William Higinbotham did a ping-pong type game in 1958

and there were all kinds of ping-pong games

on the computer, on PDP1, in the middle 60s

so, you know, come on, it's silly.

What is sure is that Mr Baer patented his ideas

and Mr Bushnell did not for a long time.

The problem is that Ralph,

despite all of his many strengths,

really didn't have a concept on how to make things fun.

The Odyssey sucked as a game console

By 1973, Nolan Bushnell's mind-set

was prevailing over any competition.

I think my games were very, very good, they were cheap enough

and they were commercial. And I think I'm the commercial daddy.

[laughs]

It really wasn't until Atari

came around that even ping-pong became fun.

C'est la vie.

When Nolan hired me to design the next video game

apparently he wanted me to get practice.

He thought of the very simplest game

he could think of, which became Pong

which is just one object moving, two score digits and some sound

couldn't be any simpler.

I did not think it was marketable.

The arcades at the time,

they were all about flying, or driving, or shooting

[laughs]

Being the role model for many

Silicon Valley entrepreneurs to come,

Nolan manipulated his first employee.

I told him that we were trying for

a contract with General Electric.

He told me that he had a contract for a home game.

The fact that nobody from General Electric

ever called or came by or wrote a letter

didn't occur to me.

Al Alcorn proved sufficiently smart.

It took Al less than a week to get the Pong game going.

He basically took a basic Computer Space set of

circuitries for the sync and everything like that.

Frankly, it was kind of a failure.

I had 75 chips in this thing

and it couldn't really exist to be more

than 10 chips to be a home product.

But Nolan didn't tell me he was going to throw it away.

The most notable feature in the

game was that it was challenging.

Alcorn segmented the paddle and depending

on which part of the paddle hit the ball

the ball would, would go in different directions.

You have the highest risk of missing the ball

and yet it's the most effective shot back.

That's probably the one characteristic

that really, really made Pong

a commercially successful product.

They were shaping the paradigm of the perfect gameplay.

The other things that we did to make Pong a good game

was speed up after a number of volleys

The game got harder as you played longer.

It got very, very hard to play.

The sound discussion showed how an Age of

Aquarius company solves important issues.

There was no sound and then Nolan

said, well, it's gotta have sound.

I said, "Really? What kind of sound do you want?"

And he said, "Well I'd like the sound of a

crowd cheering when you get a point."

I didn't know how to do that.

Horizontal management brings along

the risk of getting backtalk.

It took about one and a half chips to

do all that sound. Nolan didn't like it

but I said if you want to change it,

then you do it. I'm not going to do it.

Once Pong arrived it seemed to be

reasonable to test it on the ground.

Ted Dabney built a cabinet for this prototype over the weekend.

It only said the word Pong on it. There

were no instructions, there was a coin box

a television set, the name Pong and two controls.

We put it in the Andy Caps tavern in Sunnyvale.

Nolan and I had a beer and watched it.

Somebody came over and played it.

Approaching the game seemed to be

very simple to the people around it.

And Nolan asked this guy, "How did you like it?"

He said, "I know all about it, I know

the guys who invented this thing."

We said, save the bullshit for the girls.

Nolan immediately left for Chicago

which was the amusement capital of the world at the time.

Nolan thought he could sell the idea to Bally

which was a big name in the arcade business.

Al gets a call in the middle of the night from,

from the manager at Andy Capp's Tavern who says,

"Your machine's broken. Can you come fix it?

Turns out it was so stuffed full of quarters

no one could, could get any more money in.

The coin box was filled with quarters.

Absolutely filled with quarters.

I put them in my pockets,

I said "Gee, if that ever happens again,

you give me a call. I can fix that."

People's behaviour around Pong was changing rapidly.

The barkeep said the most important thing and

this is, this is the key, this is the real key:

he said "It's the strangest thing,

I've never seen this before.

This morning I came to open the bar

and there were people waiting outside

and they didn't order drinks. They came to play that game."

I told Nolan what had happened. Nolan said,

"Very interesting, very interesting..."

Suddenly Nolan changed his mind and

wanted to keep the game for himself.

The company business model had to change accordingly.

When we started Atari, the plan, the business

plan, was to do consulting engineering.

We wouldn't be involved with manufacturing

or sales, or any of that stuff.

Building prototypes is one thing,

manufacturing is a wholly different thing.

Atari was started in a little shop

in Santa Clara on Scott Boulevard.

I had a little lab where I did my

engineering and we manufactured right there.

We had no money to fund any of this, and no space.

I come home and tell my wife that Nolan's crazy.

He wants to build a 100 Pongs a day. He's insane. But we did.

Within two years we became bigger than Bally.

Nolan and his associates had the chance

to speculate about Pong's success.

The instructions were "avoid missing ball for high score."

You didn't have to worry about this button

gives you thrust, this button fires

and this button does this and that button does that.

It didn't have a lot of naked ladies on it.

It was very appealing to women and men,

and the other very important thing, it was 25 cents a play.

Video games were new and were about to change

the arcade's environment for a long time.

Andy Capp's Tavern is one of those bars where you

eat your peanuts and spit the shells on the ground.

A lot of these games were going into

bars where people had had six beers.

They were not kid-friendly places.

Video games appealed to kids and to

the nerdy ones more than anyone else.

I saw this game and I said, "Oh my god,

you can make a game on a television set.

Who would've ever thought of that?"

Atari was bringing out the first arcade game industry.

Really, Pong was the first game to reach the mass consciousness,

showing some of the potential

of this new medium of video games.

Video games delivered the possibility of

an alternative world in the hands of kids.

I built my own little pong game and Steve Jobs said,

"Wow, Atari!" Steve went down and got a job.

They put him on a night shift where they would design games

and I got to go down there and see their newest stuff.

I was in, I was in heaven in those days.

Atari grew very rapidly after Pong.

By the end of 1973, we sold over a 1 million dollars worth

of equipment. In 1974, probably 3 or 4 million.

We couldn't build them fast enough. So we

expanded, we rented an old roller skating rink.

All the existing coin-op operators

immediately jumped aboard the new technology.

Atari probably sold less than 20 per cent of

the Pong games in the coin-operated world.

We were heavily, heavily copied. There were,

at one time, 23 Pong-type manufacturers.

Nutting Associates had Computer

Space Ball, Williams had TV Tennis

and they were all copies of our game.

Bally and Midway both came out with their own versions of Pong.

Nolan Bushnell had his means to undermine

competition, which became a Silicon Valley classic.

Our strategy was to be the most innovative

and the most clever company around.

What we had was the ability to design

new games which our competition didn't.

But it was very hard to design these games because

we were busy trying to make Pongs at the same time.

Atari started hiring people at full speed.

I came over and I thought: "Oh, man, this looks pretty fun."

I dressed up, I wore a suit, and I went to the interview,

and I walked in and he's wearing like

a T-shirt and blue jeans and I said,

"Thank God!" and I pulled of my tie.

It wasn't corporate, it was a very casual place.

That was great! [laughs]

Atari brought the Silicon Valley informal

style to a whole different level.

There were parties every Friday, and

people would just get together and talk

and go around and play each other's games, give them ideas.

Nolan was starting to fulfil his vision

of an Aquarian technology company.

Our creative manifesto was to always take the technology

that was possible and turn it into a game.

The first change was actually Pong Doubles.

Then we did a game called Space Race

and then came Gotcha, and then came

Spike, and Volleyball and then Trak 10.

Technical limitations brought to

small teams and fast development.

A team typically consisted of the

programmer, a technician and an engineer.

Your options of what you could do were somewhat limited.

The first thing you had to do was to figure

out whether or not you could display

what you wanted to show in this game.

In this environment the mantra for

the perfect game started to spread.

Nolan said it has to be easy to learn and difficult to master.

The old games are popular because they did gameplay well.

They thought about how easy it was to do

something interesting in your first experience,

and how there was something to learn,

there was a reason to keep playing it.

One bright day the revolving doors at Atari

brought in the Silicon Valley icon to be.

Steve Jobs.

I never expected that his company would

be as big and successful as it is,

as I had a chance to own a third of it for

50,000 dollars and I said no. I've regretted that.

[laughs]

Steve was put on a new game.

You know, I didn't sleep a wink last night.

I needed an engineer to work on Breakout for me.

Nolan didn't know that Steve was not

an engineer. He could not really design games.

Steve Jobs came to me one day and he said, Nolan Bushnell

founder of Atari, wants a one player version of Pong.

Breakout was the testbed of the Apple successful duo.

Breakout was, was an amazing thing because

it was one of those games that just has hung

around as one of the classics of all time.

Atari had distributors all around the world and

in Japan they relied on a company called Namco.

Masaya Nakamura, the president of Namco saw the

Yakuza coming out with Breakout knock-offs

and he went to Nolan and said, "I need more

copies and I need them now," and Nolan said no.

Rumours had it that Nolan was unable to

speak or to think clearly on that occasion.

Nolan had been out partying pretty hard by the

time that he, that he finally tracked Nolan down.

Pretty soon Namco chose to work with Bally and Midway,

and so years later of course you see Pac-man come.

Still, in the USA, the coin-op industry was

held as one and the same with organized crime.

It was kind of run by mob types. Or claimed to be.

Indeed the industry had a bad reputation.

In fact, when we started Atari we tried

to go to the bank to get a loan for money

and they basically turned us down because

they assumed it was a bad industry.

The bad industry had recurring meetings and dinners

but one time Bushnell had another commitment.

Nolan couldn't go, and he said, "Al, I want you to go."

I took my wife,

and we were sitting at a table with

an older couple that were operators,

and I introduced myself from Atari and

the guy said, "Oh you're from Atari!"

He reaches in his pocket and pulls

out a pistol, puts it on the table.

He said, "You know you're operating in my territory."

I said, "Well, we're going to stop right now!"

[laughs]

I went back and I told Nolan that guy pulled a gun on me!

"Oh he wasn't going to shoot you."

"I'm not going to those things anymore, OK?!"

Although being successful as a new

company, Atari was always chasing money.

When you're growing at double and sometimes

triple digit rates, you need a lot of cash.

We were just grabbing a tiger by the tail.

At the same time, Nolan's management

skills were on the learning curve.

in a year and a half I went through four different

presidents and I fired every one of them

and finally I said okay, I am pretty bad,

but I'm better than any of these yokels.

The unwritten law of the coin-op business was that

when you've got a distributor you could not have two.

They took a bunch of Atari expatriates and said,

"OK, just go into that building down the street,

and call it Key Games and make the best games you can."

And Tank, Tank of course was their masterpiece.

When Atari and Kee Games merged back

together, Joe Keenan became president.

Joe Keenan actually came up through the ranks and

he turned out to be the president that I needed.

Nolan's attitude towards competition showed up in

a meeting about the future of video game industry.

I was not asked to participate, and it really,

really pissed me off. I mean, I was fuming.

And so halfway through I stood up and said,

"You guys are all a bunch of crooks and

jackals. You wouldn't know what the future is

because your only talent is copying things

that I design. You don't know what's in my lab,

how can you talk about the future? You're idiots

and thieves. That was fun."

[laughs]

My idea was to make some box that would plug in to the

terminals of a television set and cost 25 dollars, right?

Baer's way to videogaming was still

passing through the households.

You couldn't build a game for less than 35 or 40 dollars,

which translated to at least 75, 80, 90, 100 dollars

in the final product price.

Baer met a price point that was going to be commonplace

Even so, as I said, 350,000 were sold.

I remember they went to homes, so at least

three or four or five or six people played them,

by the end of '74/'75, several million

people had played video games at home.

Odyssey had no future anyway, but someone else would have.

Pong has continued to do well in the arcades

and Nolan says, you know what, we

need to bring this to the home.

We felt that there would be an interesting

opportunity in the consumer market. You know, this was 1973.

Atari didn't get back into the home business

until they saw the Odyssey and guys like Al Alcorn

and several others inside said "If

they can do it, we can do it."

Atari was beginning to think that the

arcade business was just that big.

Our sales were almost equivalent to Bally sales in coin-op

and we were selling about as many games as we could make.

We were limited now by the size of the market place.

But the drive for a real change had the name of Nolan Bushnell.

I really didn't allow grass to grow under our feet.

Nolan defined the model of Atari was innovative

leisure. It was a very broad definition.

From day one Nolan had the idea that

we should be making a home game.

Actually the idea of entering the home market came early on.

People are always confused by the Grass Valley think tank.

First of all they thought Grass Valley

was a metaphor for smoking marijuana.

Grass Valley was rural.

It was a good place to think and be outdoors.

There were a group of engineers that had

left Ampax about the same time we did.

and they moved up to a town in the Sierra called Grass Valley.

Grass Valley, the team, was a technology consultant business.

Atari liked them so much that they bought

them out and made them a subsidiary of Atari.

I said, "I'll fund a research lab wherever you guys wanna go."

These guys were responsible for a notable bunch

of breakthroughs during the 70s and the 80s.

Larry Emmons and Steve Mayer and Ron Milner were the leaders.

There were only a dozen people there.

I went out there, there were twelve people working there.

Ten of the men, all of the man had beards except

actually I think all of them had beards.

So I grew my first beard when I went up to

work there and I have never shaved it off.

Location also played a role for these technology monks.

They could really think and focus

on things six months to a year out.

All of the really good innovations

came out of Grass Valley.

Innovation was the core business at Atari at that point.

We were acting as the advanced development research firm for

all of the other coin-operated companies in the world,

so we thought that if we made a custom chip

that nobody else could buy that and we would have our propriety.

And innovation was the key to

opening the door to a new market.

If we could sell them in the home,

we could sell millions of machines.

The other coin-op companies were

very upset with us because they said

we would steel customers away from the arcade.

We said "Sure, they will be buying our stuff."

At that point it was all about vision: vision and mind-set.

Bally saw themselves as a coin-operated pinball

and slot machine manufacturer,

they didn't see a broader picture.

Nolan had a broader vision.

Sears was the first distributor to put

Home Pong in their sports catalogue.

Tom Quinn, the executive at Sears,

was a lot looser, and he was much

more willing to adopt our culture

than to force it and he kind of liked it, actually.

Atari produced 250,000 Home Pong

units for Christmas '75 and sold out.

After that there was enough business out

there for Magnavox to become motivated,

to put people under licence or sue them.

I met Nolan on the courtroom steps of the

District Court in Chicago and we shook hands and

he opted out and got a paid-up licence. He never went to court.

Nolan Bushnell is probably the

commercial daddy of an entire industry.

He was surrounded by good guys, Ted

Dabney, Alan Alcorn, Steve Bristow,

where Nolan contributed I don't know. I have

150 patents worldwide, Nolan's got two or three.

But it's not for me to comment.

The VCS was a big project, you know,

with the software and that sort of thing.

We knew that if we could make a cartridge based game

and have the program on a ROM, we could sell many more games.

The limit of the Home Pong game was that

they could only play Pong, more or less.

They had been building more

complex games in the arcade space

and they knew they would also want to bring them home.

The idea for a programmable unit

was sort of deep within our mind

before we even did consumer Pong, but

the technology, it really took a 6502.

The idea of a general purpose console leads to

a computer and therefore to a microprocessor.

We then went to a show in San Francisco.

There were people come running up to the

stands saying "I wanna buy a microprocessor."

In September 1975, I and coincidentally Steve Wozniak

and coincidentally the people from Atari

went to the Wescon show in San Francisco,

where Chuck Peddle introduced the 6502.

And we all fell in love with it.

The Atari people went off and started

thinking about using it for this machine.

Grass Valley was willing to use the

6502 for the new programmable game.

We had had a call from a place called Grass

Valley California: it turned out it was the

secret place for Atari.

So we went up to Grass Valley and in about a day

we basically made a decision that they

could build this product around our 6502.

The most important reasons had to do with architectural speed.

How many memory cycles it would take for

the processor to accomplish something.

The 6502 would have been at the heart

of many video games and home computers

during the 80s.

Once the microprocessor was strong enough,

which we were pretty sure that it was,

it was obvious that that was the way to do it,

The VCS was conceived thinking about the 6502.

The most important thing in a game

system is how you run the screen.

We built a machine that had only a line buffer

and that means that the microprocessor is busy

rewriting the screen all the way down the screen.

It is following the beam.

You have to have a fast, efficient processor

to be able to keep up with that beam.

But they had to invent a new video chip.

Another chip was necessary to relieve the burden on the 6502.

The TIA, the Stella, did not execute instructions of its own.

It could keep track of five moving

objects, and move them horizontally.

It was the job of the main processor to

first of all write the correct things to the chip.

It had to keep track of when it was

time to stop displaying things

and begin writing graphics again.

Grass Valley developed this chip on their own.

The basic architecture was laid down by

Steve Mayer, Jay Miner and Ron Milner.

My first job when I went up to Grass

Valley was to debug it and get it to work.

The code name for the video chip led

to a long lasting misinterpretation.

I looked at my bicycle and said,

"OK, I'll use Stella as my password."

Jay said "That's a nice name. Let's call the chip Stella."

He told his boss Bob Brown who said "That's

a nice name, let's call the system Stella,"

and Jay said "Oh, that means we have to rename the chip,"

so we renamed the chip the

Television Interface Adaptor or TIA.

The marketing people thought it must be some woman we know

and so they started naming everything

after some woman they knew.

The new console had very limited

hardware to keep it feasible cost wise.

The VCS had one custom chip, a microprocessor

and an off the shelf chip with 128 bytes of memory in it,

and a cartridge on a read-only memory which was 2000 bytes.

The core technology happened very quickly.

In less than six months, maybe as little as three.

Atari was going for the greatest

innovation of its entire company life.

We were finished with the chip design and

the system design by the fall of 1976.

When management came up they were quite

pleased. I'm sure there was beer involved.

Manufacturing happened in the fall of 1977.

We introduced it at the 1977 Consumer

Electronic Show. It was a smash hit.

One of the best experiences in my professional career.

It took over the whole show and

it was the talk of the whole show.

Price point followed the same destiny of Odyssey's.

We knew that we couldn't sell it for more than 200 dollars.

We kept trying to get it so that we could

build it for under 100. We failed at that.

They realized that most of the money was

in the cartridges, not in the main console,

and ever since then makers of game consoles

sell those consoles at the lowest price they can afford.

Consumer products that sold more than 200 dollars

grabbed a different part of your brain.

Under 200 dollars they said, "Oh yeah, we can kinda afford that."

Keeping cost down was not without consequences.

Because it was so simple and so stripped down

it was hard as hell to program but

you could program anything on it.

The 6502 processor was modified to further reduce costs,

and it could only address 4k of memory.

There were only so many things you could do.

I would first put that object on the screen by writing a program,

and then I would stare at that and say, you know

if I moved it to left, and I moved it to the right

it could become a video game.

Although the VCS was designed to be a general purpose machine,

it was best suited to handle something that already existed.

The Atari 2600 was designed to play

two kinds of game: Tank and Pong.

So whenever we set out to make a video game, we had to say,

"How do we take these two Tank players

and turn them into something else?"

Programmers were able to stretch those limits

to the unbelievable.

There were thousands of games made for the Atari 2600,

and each was just some technical trick that we came up with.

The chip designer of the Atari 2600 would just shake his head.

I have no idea that the hardware that

I designed could be used that way.

[phone rings]

I got a call one day from a large investor in Warner,

and as it turned out, were a large venture investor in Atari.

I can remember the question. He

said, "Would you have any interest

in a fast growing technologically

based entertainment company?"

And I said yes, not knowing what I was answering yes to.

Manufacturing the VCS for mass market was

even more challenging than Home Pong.

The VCS, no matter which way I ran the

numbers, required more capital than we had.

You have to buy all your inventory: plastic, chips.

And so we needed millions of dollars.

Atari needed cash. Now more than ever.

We were starting to explore the idea of

taking the company public to raise capital.

And we tried that. We actually had

a prospectus and we almost did it.

The stock market was not real strong at the time.

Nolan Bushnell came back to the old idea

that brought him to Nutting Associates.

We thought, "Well, maybe we need a strategic partner,"

and one of the strategic partners

that we were introduced to was Warner.

Manny Gerard was at the time one of the

smartest entertainment analysts in the country.

I wrote a memo to the people at Warner

that said I have seen the future

and it is called Stella.

Stella was the... Atari people named every chipset

for one of the pretty girls on the production line,

and the chipset for the 2600 was called Stella.

Impacting on the Atari world was somewhat shocking for Manny.

I think the first time they saw Nolan he

was surfing on a conveyor belt in a box.

I liked Nolan. He had lots of energy,

he was a wonderful story teller.

On the other hand the whole Atari

environment was wild at least.

The rumour is at least you could get

stoned just walking passed the air vents.

You have these buttoned-down East Coast executives

who are very stiff,

very refined and they're dealing with Nolan Bushnell,

who sees himself as one of the world's great

ladies' men. He's a West Coast cowboy millionaire.

Energetic, sort of larger than life, big, gregarious guy.

My first impression of Nolan was good.

Warner immediately went beyond the

idea of being a partner for those guys.

This wasn't the movie world.

This wasn't the communications world.

This was the high tech world. And they

knew that Nolan knew what he was doing.

They said "Why don't we buy the whole company?"

I thought we were supposed to gather resources.

This was going to be the first marriage

between old analogue entertainment

and the new digital domain.

They understood the hit record business,

movies, and they understood as a company

that you might fail, and fail and then succeed.

Warner was an entertainment company

thinking about the future of entertainment.

The reason we bought Atari was because

we had seen the prototypes of the 2600.

Nolan Bushnell resolved to sell his baby. Maybe too fast.

It had been a very, very stressful five years

and there was a part of me that said, "Yeah,

maybe this is a good time to sell: it was more

money than I ever thought I was going to make.

Warner put a big deal of money on

the table, or so it looked like.

They bought the company for 28-30 million.

The venture capitalists were given 100 per cent cash.

The insiders were given 10 per cent of their proceeds in cash

and the rest in subordinated debentures of Atari.

Warner was very much concerned about

keeping the skills within the company.

The problem with Atari from our standpoint,

is you had too many young people

who were going to get too rich, too fast.

My theory was that you would give them

the money and they would all disappear.

They resolved to buy them out one step at a time.

And I said to them at the time,

"If it really gets bad, we can walk away from

these debentures and you don't get anything."

Despite money, Nolan soon began to have second thoughts.

Nolan owned 50 per cent of the company.

I think Nolan got 1 million dollars on the closing.

I regretted it probably six months in after the sale.

I've often thought that if I had just taken a

good two-week vacation, I might not have sold.

Nolan used to say he had told people he was a

millionaire for a long time and now he really was.

The problem was

the first time he had a million dollars in his pocket,

Nolan went off and started to buy real estate

and got very distracted for a period of time.

Probably he was the first Silicon Valley

Age of Aquarius geek turned into a tycoon.

He would come breezing through and check the screens

and see how was going on and pat everybody on the back,

and that was a real issue.

It's very different running a division of

a big company and running your own shop.

In Christmas 1977, and with Warner money,

the VCS came out to a lukewarm reception at best.

The VCS comes out

and you know, I mean it's a new toy.

People really didn't know what to think about it really.

They were kind of "Well OK, why? What's different about this?"

In 1978, Space Invaders hits in America

and now people are starting to understand why.

People have always asked me what percentage

of the profits we put into research,

and I like to say 150 per cent.

Two good years had passed since the first VCS conception.

Too long for Nolan Bushnell.

Nolan and my instinct would be to design a new product,

just do a new product. And Warner said no,

so they put 100 million dollars into advertising that we

never would have done and they were right.

We were wrong.

For the first time, Nolan had to negotiate

his ideas with his employer: Warner.

My vision about Atari was to be the

best game company in the world,

to really create, innovate, and to, in some ways,

be more than just a video game company,

to be a technology driver.

A company that had some innovation, a lot of innovation.

Nolan has 1000 ideas a minute.

Some of which are wonderful, but he loves them all equally.

Nolan definitely wanted the VCS 2.

Barely had they hired Nolan, when he turns around

and says "You know what, the VCS is old technology.

We need to get rid of it and move on to the next one."

I think Warner became uncomfortable

with this crazy California company.

[laughs]

Manny Gerard didn't actually put much stake in the hardware.

They were marketeers.

We, well...

The total focus was on

the software and selling the software.

Your success was based on how good your games were.

Warner didn't understand the engineering side of it.

I think you can get yourself confused in getting

into the fact that it had a technology base.

They viewed

Atari

basically as a software business,

as an entertainment media.

More like a record company.

Is it that different from the music

business or the movie business?

Or even the publishing business? The answer is probably not.

To be honest, vinyl and film are less prone to Moore's law.

Memory cost had dropped by a factor of 10.

Once you can see that, you say "This game is

crappy, we got to replace it as soon as we can."

And they said "We just barely bought this company."

On top of that, different working habits began to show.

Manny would come in at nine o'clock to the

engineering lab and there would be nobody there.

And he was horrified "We got deadlines!"

The culture clash between Atari and Warner

was a clash between California and New York management styles.

Silicon Valley was rather new.

Warner didn't see the point in opting for

a specific management style with Atari.

We were used to dealing with creative cultures.

What we were not used to dealing with, to be honest,

was quite the culture of Silicon Valley.

It didn't take long until it became

clear that Nolan was the problem.

I think it made them very, very nervous

to see Nolan making these rapid moves.

We can't run a company based on your instincts solely.

Now all of a sudden he's sold his

business for 28 million dollars,

he's playing tennis in the morning

instead of coming directly to work,

and he wants to cut off the VCS.

Manny Gerard wanted budget planning,

marketing campaigns and sales goals.

You cannot disappear for six months,

walk in to a meeting and say,

"We're going to do it this way, because I say so."

You've got to bring somebody in with business discipline

because this thing is growing, it's growing too fast,

and it's going to go out of control.

Manny started to look outside of Atari and word spread.

I was having lunch with a classmate

of mine from Harvard business school,

and he asked me if I would be interested in

working for a company in California named Atari.

I laughed when he asked because I love my job

and I've no interest in living in California, I'm a New Yorker.

Ray Kassar was a vice president at

Burlington Industries, a textile giant.

I met Manny, what was supposed to be a very short interview

was about three to four hours because Manny likes to talk,

so finally I said, "Look, I'll go out there for a weekend

and check the place but that's all I will do."

Ray, the New Yorker, let himself be courted by the VCS idea.

I went to California. I met Nolan Bushnell

and I was very intrigued with the product.

I thought it lacked everything. There was no marketing,

there was no infrastructure, there was no

manufacturing guy, there was no financial guy,

there was nothing.

A few days later Manny asked me to come to

have a meeting with him and Steve Ross.

They made me an offer I couldn't refuse,

so I said "I'll go there for six months,

I'll start the process of reorganizing the

company, then I'm coming back to New York."

I stayed for 8 years, I guess.

It was pretty obvious to us that he was there to replace Nolan.

Manny was feeling more and more confident

about getting rid of Nolan.

The showdown between Nolan and Manny Gerard came early on.

He said "We're going to put Ray Kassar in the CEO

and you can stay as consultant if you want or not,"

and I said "You know, this isn't my company anymore."

What occurred at that point was an incident.

Nolan came into the budget meeting in December '79,

and just looked up and said, "Sell off

all your inventory of 2600. It's over."

Forget the Warner people,

the Atari people didn't know what he

was talking about. They just gasped.

The chairman of the company board, the guy

who invented it, says its all over.

At that point there wasn't much

Nolan could do to avoid Game Over.

Manny said, "If you keep on going around undermining

me, that's gonna be bad for the company."

Nolan said "Then get rid of me, you know,

buy me out," and they did.

There were certain elements of my contract that

were better off if they fired me than if I quit.

So I decided to be such a pain in the ass

that they would fire me...and that worked.

Getting fired was the easiest task for Nolan in years.

Nolan was wearing a T-shirt which said "I love to fuck."

He was walking around the company wearing this T-shirt.

OK, I thought they are a little crazy out here,

and then he invited me to a staff meeting.

Al Alcorn and all the key engineers

were there: about six or seven people,

and all drinking beer and smoking joints

One guy poked me and said "Here,"

and I said "No, I don't smoke,"

and they said, "Oh, lighten up, you're such a stiff

New Yorker, now this is California."

I said, "Nolan if you're going to conduct

business, fine, otherwise I'm busy."

I got up and left.

Thank you very much, Harold!

Oh, Jesus Christ.

Ray Kassar had wanted to be CEO of

Atari, maybe from the very start.

I realized I couldn't function with this

environment unless I was running the show.

So I went back and and said to Manny "I have to be

in charge otherwise I can't do anything for you.

I'm coming home."

With Nolan Bushnell they applied

what they called the "beach clause."

We removed him. He eventually came to me and asked

to be relieved of his contract. Which we did.

He said "Will you buy back my debentures?"

We bought them back.

Warner had bought out the

shareholders in a very clever way.

Warner, Manny, probably figured that we would piss the

money away and kill ourselves with cocaine or something.

We've got to figure out where we were.

They structured the buyout, it was a

seven year payout of money.

And he took his money and he left, and then

when the explosion at Atari occurred

he had this very small residual position in the bonus pool

that would have been worth

millions and millions of dollars.

It's a whole complicated story about

individuals and corporations.

I said I wouldn't stay unless I was in charge.

I'm sure he was asked to leave. He resigned.

Without Nolan, the Atari identity was at risk.

I really liked Nolan,

so I was hoping that Atari would replace him

with somebody else who understood

technology and marketing,

but I don't think Ray was a technologist.

Ray imprinted Atari with his own management style.

The corporate offices changed.

Ray didn't play video games,

the office was very simple and bare.

We always had the next secret great video game in the office.

Did you think it was significant?

Why would I want to have a game there

too, unless I was gonna play with it?

I wanted to focus on the work, let people know

I'm not there playing games in my office,

but I had them in my house. Had a whole room.

Our coin-op products and every consumer video game we had.

Surprisingly enough, Al Alcorn attempted to stay within Atari.

I didn't leave. Nolan left, I wanted

to stay around it. Atari was my baby.

Soon the true reasons behind Nolan's

departure started to become apparent.

Atari became a little bit less technology focused.

They became much better at managing

things and managing inventory.

I didn't realize how serious it was when I got there.

They were losing money, the company was losing money.

The focus was on making the VCS a successful

product, and that's where I devoted my energies.

But the Age of Aquarius company was fading away,

once and for all.

Culture clash.

It was very formal, very hierarchical.

He instituted an executive dining room

so that the executives didn't have to

work with the engineers or touch them.

In a while the new management was

going to learn that in Silicon Valley

technology and creativity are one and the same.

I think they missed something creatively.

If you have a successful product,

it's incumbent on you to figure out

what to replace it with before your competitors do.

The one insight we didn't have was that you have

to obsolete your own products as fast as you can.

I found that Ray was so much different than me.

I mean, the idea of having a car and a

driver bringing me to work every day

was so foreign to everything I stood for.

No, it wasn't a limousine, it was my car.

There's a little difference.

I had a driver, it was one thing I insisted on,

I said, "I'm not a very good driver

I didn't want to drive on 101,

I would need a driver". And they said, "No problem."

It was not a limousine.

It was just the wrong way to run an Age of Aquarius company.

The controversy between Bushnell and Kassar

went on even when Nolan was no longer there.

He's a very creative individual,

he's the idea man and he's brilliant.

[laughs]

But he's not a guy, in my opinion,

capable of running a business.

What about Ray Kassar?

I think their strategy under Kassar, if one existed, was

"Sell as many of these things as we can."

They saw them as widgets.

That's so wrong.

They didn't see a pathway to the future.

In fact, Warner was trying to move

away from the usual cash nightmare.

What this company needed more than anything else

was just somebody who understood how

to manage a decent sized business

and had sound business principles.

There was no marketing to speak of,

they weren't even calling on the chains like

Sears, Penny, there was nothing.

The coin-op division was the only one

which seemed to be working properly.

We had a very strong coin-op position

as opposed to what we had in consumer.

We really tried to keep that

building as an island of creativity

amidst all of the big company culture that was growing up.

Soon after Ray began working at Atari, things started to change.

We were beginning to get the

distribution, we were beginning to sell

Sears and other major, we finally got it to Walmart.

That's what we needed, we didn't have that.

I would say advertising was

probably the most important thing.

We went to Doyle Dane which was

at that point the top advertising agency.

In 1978, Atari was basically

turning into a different company.

We went from a small, engineering-driven company

to a very large marketing-driven company.

Ray Kassar came into direct conflict

with the engineering style

that had been established at Atari for many years.

The relationship between Ray and the hippie

techs from the bay area never took off.

Ray came from a very stable fabric industry.

I think he figured he had a product,

VCS, that was going to last forever.

High-tech is changing all the time.

In one of the very first meetings

he held, Ray sounded pretty weird.

He said that we were gonna start

selling computers in designer colours

so that women would buy them.

He was 16 years ahead of the iMac.

We in engineering were appalled.

We thought "Yes, he gets merchandising and marketing

but he doesn't understand the technology at all."

Christmas 1978 was the moment of truth for Manny and Ray.

And I got called into Steve Ross's office who was

the chairman of Warner, and we were alone,

and he said "What are we going to do?"

Now remember, this is about December 10th. I said,

"On December 26th, there won't be a 2600

on any shelf in any store in America.

If I'm right, we've got a huge business.

If I'm wrong, we're in trouble. But there

is nothing we can do in the next 15 days,

so let's relax and see what happens."

And of course, December 26, you

couldn't get your hands on a 2600.

I mean, the thing just blew through, it was one

of the biggest products in the country.

1979 was the year and it was Space Invaders.

This is an interesting story.

Manny Gerard was the kind of New Yorker

that liked to be on the West Coast most of the time.

One day

I went over to coin-operated engineering with the

people that made the games for the arcades.

And here are all our engineers,

with coin-operated Space Invaders, not even our game,

and they're playing Space Invaders.

I went into Ray Kassar's office and I said "Ray,

I want to make a Space Invaders cartridge

and I want to license the name."

Licensing a coin-op title for the home was rather new:

more often you simply stole the technology.

And I said to him, "Ray if we can't

license the name, steal the technology."

I said "Duplicate it.

But I'd rather license the name," and we did.

Licensing became reasonable when video games became brands.

Through '78 the majority of things are Pong and racing.

Space Invaders creates this relentless world.

You know you're gonna die sooner or later,

those Space Invaders, they just keep on marching back and forth

and back and forth and you know, your

bases are dissolving around you,

and it's a pretty good representation of a nightmare.

Two things made Space Invaders a

breakthrough: one was the gameplay.

Space Invaders was a monster game,

I mean, it was such a good game.

Space Invaders was another game that had the beauty of

the "simple to learn, hard to master,"

you could see how the game was getting more difficult as

the aliens move faster and drop down lower.

But Space Invaders could also convey

the idea that you were "there" somehow.

The game play, the pacing of the game, the suspense,

the theme, was, you know, just completely captivating.

I think it captured the entire world really to the

potential of video games and where they could go.

It was clear from the start that

Space Invaders could start a craze.

When Space Invaders started in Japan,

many thousands of arcades opened up

just to be able to play Space Invaders.

They were called Invader Houses.

This caused a shortage of the hundred yen coin in Japan.

Manny Gerard move proved to be the right one.

We licensed Space Invaders,

and the game was introduced in September of '79,

and it was an instant phenomenon.

Suddenly the 2600 was the most

exciting product anybody had ever seen.

This was more a brand licence than anything else.

The Atari VCS technically could not actually do Space Invaders.

You were not supposed to be able to have rows

full of enemies that could be individually shot.

So they would tell it to draw that same

sprite over and over and over again.

It didn't quite look like the arcade version,

but it was unmistakably Space Invaders,

and it was a big, big hit for Atari.

Space Invaders had opened a brief

era, now known as the Golden Age.

There was an arcade golden age that started

in late '79. It really lasted through '81.

In 1981, Americans spent 75,000 man-years playing arcade games.

They dropped 20 billion quarters into arcade machines -

that's a golden age.

Video game creativity was probably

reaching a peak in those days.

You get Galaxian, Moon Cresta,

and people are enjoying those, and then comes Pac-man,

and no one was ready for that.

Pac-man was yet another shift in terms of audience.

Iwatani wanted to appeal to women,

and specifically he wanted to appeal to couples.

You know, if I can get these two people

on a date to play this game together,

then I could really possibly have a hit on my hands.

Toru Iwatani had been doing marketing.

from the developer's standpoint.

Girls love getting dessert at restaurants,

so you know, what if I had a game with

all these little food items in it,

let's make the monsters cute. Let's not do a

space game where everything is black and white,

let's make very vibrant colours.

The girl, who was probably the one

dragging the guy to the bowling alley,

she would actually say, "Oh, that's

so cute, I wanna go play this game."

Iwatani's ideas definitely hit the mark.

Within a year, Pac-man's on the cover of Time magazine

and MAD magazine in the same year.

Before Pac-man,

most of the people who would hang out there

would have lots of tattoos and smoke cigars.

Pac-man came out, it started bringing the

public into the recreational centres.

Once again, the gameplay was pretty easy to learn.

You are pretty much guaranteed of making

progress when you first start playing it.

You start eating dots, your score starts going up,

I mean it's very, very easy in Pac-man

to eat the first energizer dot.

And it's very easy to eat your first ghost.

At the same time Atari was

experimenting with vector displays.

They were very clear: you could

create Star Wars-looking spaceships,

that's what Space Wars had looked like from the start.

One of the smartest engineers in the coin-op

division was Ed Logg: the Golden Boy.

Ed Logg did Asteroids, which was Atari's all-time biggest game.

Every time you shoot one to blow it up and protect

your ship it breaks into smaller asteroids.

I think he wanted to include elements of the game,

the 'impending doom' kind of elements, the self-preservation

that were found in Space Invaders.

Asteroids perfectly applied the Atari mantra about gameplay.

If you looked up "Easy to learn,

hard to master" in a book of quotes

there would be a picture of Asteroids right next to it.

Also, Ed Rotberg achieved huge outcomes with vector displays.

Ed Rotberg came up with Battle Zone.

The game was based upon taking the original Tank game idea

and making a first-person 3-D game using the vector graphics.

Battlezone was a step forward to an immersive environment.

This was the first game that let you freely

move around in a three-dimensional world.

That was new, that was not something

that most people experienced.

The arcade games had progressed to the point where they were

more like a computer that you might recognize today.

You should design your business

on the assumption that not all of the

smart people in the world work for you.

By the beginning of the 1980s the VCS

was still surprisingly successful.

They were doubling their sales volume every year.

They went from 30 million, to 60 million,

to 120 million, to a quarter of a billion

to half a billion, to a billion dollars,

to 2 billion dollars in consecutive years.

In 1982 they grossed 2 billion dollars.

This was the hardware that

appeared severely limited in 1977.

The programmers continually surprised

us with how clever they were,

and it went a lot farther than anybody expected.

David Crane from the consumer division was

considered to be one of the wizards of the VCS.

I actually loved that machine.

You have the hardware telling you,

well this is all you can do.

The technical boundaries, they could lead you in a direction.

Throughout 1978 Mattel had considered

entering the console market.

Mattel looked and said, "You know what, that VCS,

that's a toy. We should be doing that too."

Mattel was saying,

"Technology is coming down the pipes

to do a better job to put up an entire screen at a time."

Not so different from the VCS, Intellivision

relied on a dedicated chip for graphics.

They called it STIC, S-T-I-C.

Standard Television Interface Chip,

which sounds nice and generic and presumptuous.

Basically it created eight positionable

objects so that freed up the processor

to concentrate entirely on the gameplay.

Cleverly enough, Dave Rolfe compiled an

operating system for the Intellivision.

You have to draw the object, you have to

put the picture into the video memory,

you have to give commands to the computer hardware.

A lot of that is very generic,

so all of the stuff which is similar,

common between games, could be put

into a common operating system,

which was another reason we could do better games.

In 1981 the console war was reaching its climax,

and Nintendo was trying to benefit from it.

We were not in home video game business yet, so

we decided the successful Donkey Kong in coin-op

we should license it to different companies.

We looked at Atari and Coleco and other companies.

The console war had ignited another war: the licence war.

You had kids that were going to arcades and playing games.

You knew what the hits were in advance.

It's like saying,

"Gee, I'd like Harry Potter books to make movies."

Of course you would. They're pre-sold. The marketing is done.

Coleco had entered the video game market as early as 1976.

Coleco was short for Connecticut Leather Company.

Greenberg, the guy who owned Coleco, had big ideas.

He's like Nolan. He doesn't wanna stay

small. And so he expanded into video games.

The Coleco Telstar had been the competitor

of the Atari Home Pong back in 1976.

Coleco made a pretty good splash with the Telstar,

and their early Pong competition.

Made a much bigger splash, years later in '81

when they came out with the Coleco Vision.

In 1982, Coleco hardware could beat

the VCS by an order of magnitude.

We decided Coleco Vision is

probably the best quality hardware.

Coleco doesn't have many hot games,

so they will really push Donkey Kong

in order to sell the hardware.

So Coleco started marketing

Coleco Vision together with Donkey Kong.

Donkey Kong on Coleco Vision

looked just like the arcade game.

Manny Gerard was the strongest

supporter of a Donkey Kong licence.

I said to Ray Kassar, "Why didn't we license Donkey Kong?"

And he said, and this one's burned in my brain,

he said, "Because they wanted two dollars a

cartridge for it". We still paid 50-60 cents

"Ray, we got 88 per cent gross margins on these cartridges.

A year from now, Ray, we will collectively

crawl through shards of broken glass

to pay 2 dollars a cartridge."

I don't remember any serious discussion

about Donkey Kong, quite frankly.

At that moment licensing coin-op brands, or any

other brand or concept, was the key to success.

The business was outrageously profitable and what

was driving the business was the coin-op title.

Mattel was interested in licensing product,

Coleco was interested in licensing product,

everybody wanted to license.

Mattel had found a decent market share in sports games.

Mattel was very big on buying company logos.

It wasn't baseball, it was Major-League

Baseball. They had the logo.

Blackjack and Poker wasn't Blackjack and

Poker, it was Las Vegas Blackjack and Poker.

They paid, I think, the city of Las Vegas for that logo.

Colecovision was indisputably more

powerful than any other console around.

And their whole thing was arcade fidelity.

They look so much more like the arcade counterparts

than anything you're gonna get on the Atari,

anything you're gonna get on the Intellivision.

Most popular home video game!

More and more, the consumer division at Atari

was relying on third party properties.

Strategically it was very smart.

The execution was not always very good.

In fact, it was poor in some cases.

The downside of licensing a brand

is that you have a promise to honour.

You know, people were expecting to see, you know,

the detailed graphics of the arcade machines, but

they would end up seeing the simple

graphics of the, the VCS machine.

Most of the conversions of the arcade games

into the VCS turned out to be quite challenging.

The explosion in software created what I

like to call the intellectual blue collar.

One day Atari programmers understood

their actual role in the business.

The marketing department sent out a memo.

What they were saying was,

"Do more that sold a lot of games, instead of

the kind that sold a few games."

The memo, for the sake of

exactitude, reported some numbers.

We added them up, and the four of us

were responsible for 60 per cent of Atari's sales.

So the four of us were responsible

for 60 million dollars in one year.

Needless to say, those engineers were very good at maths.

In the software industry, the people

at the bottom of the org chart

were just as smart, if not smarter,

than the people who were managing them.

Which was OK, as long as the people who were

managing them didn't try to manipulate them.

Ray's relation with game designers

was not ideal from the very start.

Ray famously held a meeting when he first got in

and he said, you know, "I want to put everyone's fears to rest.

I've worked with designers for years in my career."

and somebody thought "Oh my Lord,

he's talking about towel designers."

Bob Whitehead, Alan Miller, Larry Kaplan and

David Crane decided to go see Ray Kassar.

We took that memo and we went to Ray Kassar,

we said "You know, we're good company men. We love Atari."

A lot of these, these games, they were created by one guy.

If there's music in the game, the guy did the music.

If there' s art in the game, the guy did the art.

They made a proposal which saw royalties involved.

Can you just take 10 cents out of every

cartridge and put it into a bonus pool

and you know, divide it up so that those

people who do better games make more money?

They can't put their names on the

games. They can take no credit.

They're not even really supposed to go home and say,

"Hey I worked on this game," if they see someone playing it.

This was not the business model that Kassar had in mind.

Ray Kassar looked us in the eye and said,

"You are no more important to Atari than the person

on the assembly line who puts them together."

I don't remember, they were coming to me asking for a bonus.

The engineers started to think seriously

that Kassar didn't like them at all.

He was quoted in, I think, Fortune magazine

calling our engineers as a bunch of high strung prima Donnas

that are a dime-a-dozen.

They are prima donnas, they were, but they were great.

Within a week we had a T-shirt made

that said "I'm just a high-strung

prima donna engineer from Atari."

The four programmers left Ray's

office with a precise idea in mind.

We were escorted out of his office

by one of his senior vice presidents.

He said,

"It's pretty clear you guys are going to

be leaving, good luck, I wish you well.

There's nothing we can do."

The initial idea behind Activision

was still very corporate indeed.

We should either go out and form just a small company

to develop games and sell them back to Atari.

We weren't ready to work with an outside group like that.

Or maybe we just go all the way and create a publishing company.

Activision was the first third party

developer of video game software.

Manny Gerard had known from the very start that

Atari was just another form of the entertainment industry.

Let's be straight about this.

Forget the superstars, the superstars always reach

a place where they can get whatever they want,

but in the main, as you go through any creative industry.

I don't care if it is movies, or music, or video games,

the creators of great success,

frequently feel, and maybe correctly,

but the business model doesn't allow,

that they don't get enough money

because you don't know what a great success is.

You don't know until after it happens.

Interest about the new company was rising high.

Activision went to its first trade show

with four games for sale:

Dragster, Boxing, Checkers and Fishing Derby.

Activision was, it was the hit of the show, I have to say.

Initially Atari wasn't that much concerned about the competition.

They thought they were safe

because they had trade secrets that weren't published

on a machine that was difficult to program.

We tried to stop them by suing them and that didn't work.

In court Activision easily demonstrated

that they didn't steal any secrets.

It was possible to reverse engineer how it was programmed

so that they could do business without

being subject to a theft of trade secrets prosecution.

I think Atari actually tried to sue them

to find out how they'd done some of the things they were doing.

Activision's games actually had

something that the Atari ones lacked.

We used a number of techniques.

They were doing 2 or 3 times the number of colours

that the system was supposed to be able to show.

We would only use the greenest grass and the bluest sky.

You would say, "Wow, that looks better

than the games that Atari was doing,"

and nobody understood why.

David Crane went on to design one of

the best known VCS games of all time.

I figured out a way to draw a little running man.

So I asked myself, "All right, he's running...

Where is he running?"

So I made a path, now he's running on a path.

Where is the path? Let's put the path

in a jungle. I drew a couple of trees.

Why is he running? I put some treasures

and, you know, the scorpions.

Pitfall urged the player to explore a

whole new world within the machine.

I used a special binary counter to define the screens

instead of making every screen a block of data.

There were 254 screens, I think, in the Pitfall world.

Technically, Pitfall inspired thousands of games yet to come.

What it did do is it created an entire genre of video games.

What are called the platform games.

There were maybe 600 platformer games made after Pitfall.

Unfortunately, Activision's success

inspired emulation in the Atari ranks.

Most of the people

didn't particularly like the guys at Activision.

They kind of looked down on everyone

else, according to everyone else at least.

Especially Dave Crane, who has that

side of inherent personality anyway.

Activision's success

made people say, "Well gee, all I have to do is

borrow some money from a venture capitalist,

put some programmers in a room and

tell them to design video games."

Other key people in the consumer

division were thinking about leaving.

About that time I had decided

that the five thousand person, multi-billion-dollar

company environment wasn't for me anymore.

I called my good friend Bill Grub who was

the vice-president of sales at Atari

for the consumer division.

Two weeks later, Imagic was born.

We went out and raised a couple

million dollars in a couple of days.

The game developers were becoming

something closer to an entertainment star

than some weird engineer.

It's easy to say it wasn't only the money.

Atari wanted the programmers to remain anonymous,

and we made it a point to identify

the programmers and the artists.

Competition brought better games, at least initially.

We as programmers took it upon ourselves

to continually challenge Activision.

Our biggest hit out of the chute was a product

called Demon Attack, which was done by Rob Fulop.

That was a big hit for Imagic, we sold many millions of those.

As entertainment stars, programmers

started to behave accordingly.

Programmer egos were much larger than

what would have fitted in 128 bytes.

I used to drive, at that time, a Porsche 928,

David Crane had a BMW 7 series.

We all drove, you know, fancy fast

cars, we all made a lot of money.

Behaving as stars had its upsides

as well as the downsides.

They were very sensitive, very sensitive,

very creative, like children,

so I spent a lot of time trying to reassure

them that I wasn't really a bad guy.

I remember we had this one guy, he stayed with

me for three hours telling me about his poetry,

and that he came to work at midnight

'cos he couldn't work during the day.

He told me all his idiosyncrasies and

I had to be a very good listener.

Kassar's concessions came too late, and too little.

All the good engineers, all the good programmers left Atari.

Even though Ray raised the salaries, he didn't

even know how to hire the best engineers.

He couldn't tell the good ones from the bad ones.

Kassar avoided disaster just a few

seconds before all of the programmers left.

I was about to leave on the third round

of company formations

that Atari came up with their own competitive bonus plan.

1980 had been the year of Pac-man.

We concluded that nobody was ever

gonna make a better game than Pac-man.

Atari reacted rapidly in the wave of the licence war.

It was a big hit in Japan. And we did make a deal with Namco.

The 2600 was limited in its technology, and the

technology got pushed and pushed and pushed

until you couldn't push it anymore

and you couldn't do anymore with it.

Despite hardware constraints, Atari

put out tons of their own Pac-man.

They made more games than there were

consoles out there in use at that time.

They'd figured people would be so excited to buy Pac-man

that they'd buy a console just to play the game.

But hardware constraints backlashed

against the Pac-man conversion.

Converting coin-op games to the VCS

was never really a good thing to do

'cause the VCS was a static technology, and

coin-op games kept getting better and better.

Pac-man had too many objects on the screen,

moving too fast and too independently.

Pac-man kind of flickered back and forth.

The system only supports two 8-bit sprites.

The designer of Pac-man cartridge

uses one of them for the little eater

thing that runs around the screen

and he uses one of them for all the other ghosts.

Now, there are four of them on the screen at any given time,

so he's basically displaying each

ghost one quarter of the time.

Now that makes it flicker.

Only some executives at Atari were taking

the technical limitation of the VCS

in the proper account.

It sold zillions of copies, just because

the name was powerful enough to carry.

I may not be proud of the cartridge

and the public had a right to be disappointed.

Game quality didn't seem to be a serious

issue as long as sales kept going.

It sold six million copies.

I don't know what else I can say to confirm.

It was probably the most successful launch

of a video game or any product in America.

The game wasn't bad, it could've been better.

It wasn't maybe the greatest, it was fine.

At the engineering level,

the opinions were much less forgiving.

They marketed it as Pac-man and what they

released had nothing to do with Pac-man,

which made the Pac-man experience look that much worse.

Disaffection started to spread like a virus

among the VCS users.

When Atari released 10 million Pac-man cartridges,

that was the beginning of the end of Atari.

OK, the ET video game was a very

interesting situation to say the least.

The Atari collapse was really the story about ET.

Steve Ross was once at lunch with Steven Spielberg,

and had what he thought was a great idea.

Steve Ross cuts a deal with Steven Spielberg

for the name ET.

He said, "We make a video game out of [his] movie ET,

and I have guaranteed a twenty-five

million dollar payment."

He said, "What you think?"

I said, "I think that's is the

dumbest thing I've ever heard."

In 1982, the licensing war seemed to peak.

Unfortunately, the 2600 hardware

couldn't do just any video game.

The reason video games that were done as movie titles

didn't do very well is because they couldn't be done very well.

What was clear from the very start was that the

available time was insufficient for doing anything.

I said, "It is now August, Steve," he wanted this product

created and shipped for Christmas business.

I said, "The lead time just getting the

semiconductor chips is longer than six months.

We are going to have a hard time getting the chips we need."

Also, creative concerns arose.

The character wasn't basically appealing other

than in the movie. It was this ugly creature.

I didn't know if we can make an

action game out of a story like ET.

Atari had gone through these kind of operations before.

Atari had negotiated with Steven Spielberg to

get the rights for Raiders of the Lost Ark.

Inevitably, movies had an emotional component

that no one had ever explored in games.

I sat down

ten and a half to eleven months of solid work doing that game.

It was a million-seller.

Ray Kassar was still very sceptical

about going through the process.

I tried to convince Steve that it doesn't make sense.

He said, "Do the best you can." We did the best we could.

The schedule was extremely tight.

The movie was in the spring, and then by Christmas the same year

Atari wanted to come up with an ET game.

That leaves about five and a half weeks to do the game.

At that point, the notorious Howard

Warshaw entered the picture.

They called up our department and said,

"Who can do the ET game in five and a half weeks?"

And my boss's boss told Ray Kassar, "No one!"

But Ray Kassar

decided it was worth calling me anyway,

"You know, Howard, we just got the rights to ET,

can you do the ET video game in five weeks?"

I said, "I absolutely can do the game in 5 weeks,

provided we reach the right deal." And he said OK.

Kassar thought Warshaw was the only one who could make it.

Actually he was the only one that didn't say no.

The deal was that I got an additional

bonus, and I got an additional advance,

and they signed it off, and they gave me a

cheque and I did the game.

Warshaw got his deal and went back to work.

They came out with an ET game that was a real bummer.

The ET was a truly terrible game.

I mean ET kept on falling into all those little ditches

and then you had to float him out and the game stunk.

Warshaw had to meet with Steven Spielberg

to discuss the concept.

The secret to doing a game in five weeks is to

design a game that can be done in five weeks.

I had a couple of days to design the game and then we flew to LA

to present the design to Steven Spielberg.

Mr. Spielberg proved once again to

understand the entertainment business very well.

"Pretty cool," he goes, "I kind of like that, but

couldn't you do something a little more like Pac-man?"

I looked at him and what I

wanted to say to him was, "Gee Steven, you know.

couldn't you do something a little more

like the Day the Earth Stood Still?"

But I didn't say that, because it was

Steven Spielberg, and I was just me.

At that time Warshaw thought he would

just stuck with his ditches idea.

Maybe he was right. Maybe we should have

done something a little more like Pac-man.

Atari pushed the game like they never had before.

It didn't take long until people find it's not a good game.

So people returned it to the store

and retailers tried to return it to Atari,

and it was chaos.

Once a toy goes into the closet, it never comes out again.

The ET flop triggered a domino effect on the whole business.

One of the reasons it's known as

one of the worst games of all time

is not even because of the gameplay.

One of the reasons it's known is because of the

financial disaster that it seems to have generated.

We produced four million and four million came back.

I knew we were going to have a terrible quarter.

There were a lot of returns

along with millions and millions of

other cartridges that weren't selling.

A sense of panic started to spread through the ranks.

Movies are going to fail, records are going to fail,

and the minute you get a management

that gets beat up the minute they

have something that fails, you're dead,

because they no longer think clearly.

Ray Kassar felt he couldn't really

rely on his team the way he used to do.

There was a lack of really good product.

No one was very creative, suddenly something happened.

We all got depressed.

We were doing so well and all of a sudden,

because of something we had to do,

we had this failure and it was

tough, was very tough on all of us.

Worse than that, gamers all over the country

started to be less enthusiastic about video games.

Pac-man was a failure in delivering the

most popular video game at the time,

and then ET was a failure in delivering

the most popular movie of the time.

A lot of people said, "You know what? I'm done with this."

Howard Warshaw took the money home

and is still thinking about it.

Was it the worst game ever made?

I've also done Yar's Revenge,

which frequently, on a lot of lists, is known

as the best game of all time on the VCS.

So having done the best and the worst

I figure, I have the greatest range

of any game designer in history.

I'm very proud of that fact.

On December 7th 1982,

we had to make an announcement

about the fact that our earnings were

going to be well below expectation.

For several days Manny Gerard had tried to

understand what his intuition was telling him.

I remember it well.

It all started because I kept asking questions

of the salespeople about the sales of the ET cartridge.

"How are they selling? Was Pac-man there?"

"Oh they're selling great, we're going to

meet the projections, everything's fine."

Unfortunately, one of the most difficult things at

Atari seemed to be obtaining the numbers easily.

They had created such a stratified management that

top management was unaware of what was going on in the field,

and by the time they realized

nothing was selling it was too late.

Apparently, Manny was the only one

to feel something was going wrong.

I didn't believe it. My gut told me it wasn't going to happen.

I was nervous. So I had called up Dennis Groth,

who was the CFO of Atari, Chief Financial Officer,

and I said, "Dennis, I want you to go through the numbers

and I want you to tell me what is happening."

And the night of December 6th, I got a call.

And he said, "I've been through the numbers Manny,

we're not going to make the numbers at all."

Not meeting projections was not appreciated on Wall Street.

Atari was making, I think, over between 1-2 billion a year.

We were the largest revenue producer

for all of Warner Communication.

After Atari was making lots of money

we got T-shirts that said, "Warner: An Atari company."

Obviously, Warner had to be crystal

clear about the situation.

We waited for Steve Ross to come in,

and we sat down in the room and we all

came to the same obvious conclusion,

and we put out that announcement, and

as you know, the stock got murdered.

They were not going to go in the red,

but they were going to grow 15 per cent instead of 50 per cent,

which was not appreciated.

By the end of the day, Warner Communications'

stock had dropped by a third.

It was not the fun day, I will tell you.

The reason why Atari didn't meet the

projections was a whole different matter.

They'd sold as many 2600s to anybody who wanted them,

and to try to push another 10-15

million units into the marketplace...

It was too much,

and you had a lot of retailers getting very scared.

One undeniable fact was the Atari VCS obsolescence.

Coleco comes along and Intellivision is there,

and Atari realizes that

way too late, that they need to step it up.

If I had been running Atari

the VCS2

would've been out in 1980,

and the people who had grown tired of the 2600

would've started to buy the next generation,

which is what we see today.

Engineers blamed the management

for not understanding videogaming at all.

It takes more than one person to

create a failure of this magnitude.

Atari was the fastest growing company

in the history of American business.

Nolan Bushnell sold it for 22 million, and like

two years later it had a billion in sales.

The video game industry was still at

that point quite a mysterious object.

There were plenty of games that hadn't

sold well before Pac-man and ET,

but they didn't create the kind of

financial crisis and the kind of consumer

confidence crisis that Pac-man and ET did.

The business model at Atari was still

a trial and error learning process -

a billion dollars a shot.

All of the business models subsequently have

built up on the fact that I have complete

control over the software that goes on my system.

We spent hours with lawyers, is there

any way we can control the software?

The answer was no.

Literally everyone was publishing video games,

putting quality and price point severely at risk.

The Quaker Oats company that makes

breakfast cereals had a video game company.

Every one of those companies built a

million cartridges that didn't sell,

so they end up selling them for 5 dollars apiece.

This roller coaster ride filled

the retailers with mixed feelings.

The retailers were never really sure that this

whole video games thing was gonna keep going.

Atari, on its side, had the power for

putting distributors under pressure.

When the tide started to turn

everyone who got the chance to screw

Atari screwed them to the wall.

The dam started to crack with Pac-man.

The cracks got a little wider with ET,

when the first few major cracks occurred, Bam!

Killed the village, it drowned the whole town.

The only one to have a different opinion about

the quality issue is Mr. Bushnell himself.

I believe that controlling the software has been

a very, very faulty analysis of what happened.

The crappy software story

had nothing to do with what was going on.

Warner did try to put 15 million VCS

into a market that only wanted two.

And whenever you have that much supply overhang, markets crash.

There's little doubt that the man who pushed

the market so far was Ray Kassar.

Ray was in charge of a wild runaway train and

he didn't really know what was going on.

Could it be that Atari was simply not manageable at all?

When I got there in '78 the company was doing

about seventy-eight million dollars in sales.

Three years later, we were doing over three billion.

When Atari was moving up so rapidly,

we added a lot of overhead.

We, for example, went and built a factory in Hong Kong.

We decided, now we'll go and build a plant in Ireland.

Atari's growth was one never heard of

before, and quite astonishing.

When I got there I don't remember the exact

head count, but let's say maybe it was 150.

When I left it was 12,000.

To go from 150 to 12,000. It's a nightmare.

When income started to slow down, Ray Kassar

was not prepared to kill his creature.

I remember I made an effort.

I came up with a plan to reorganize the company.

You've got to go in and just hack it away

with incredible speed, and very few

people are capable of doing that.

Ray and Manny were looking at

things getting worse day after day.

Next year it went down to 200 million dollars.

So it's not, it's not like down 10 per cent or down 15 per cent,

it's like less than one tenth, or less than one twentieth.

Nolan Bushnell was clever enough to

make a profit from the bad situation.

I actually had a big short on the Warner

stock, I made a lot of money when they failed.

But at the same time I would've preferred

to continue to be running Atari.

My own opinion, and I

take some responsibility for part of this too,

was Atari became so successful, so fast, and was so profitable,

I think it went to everybody's head.

And I think that led to some mistakes.

Atari had invented an entire industry from scratch.

We spent a lot of time looking at

the business and asking ourselves

"Where can it go?"

To some extent, in the short run, it was a fad.

The inception of Atari had been coin-operated video games.

The arcade business has dropped off the face of the earth.

People said, "You know, this year I think

I'm gonna take up tennis,

or next time I go to the bowling alley..."

Their parents, their mother and father, suddenly said,

"I just bought you this home game system, I'm not going

to pay for you to go to the arcade anymore."

The turning point happened when Warner bought Atari with cash.

Just doing a spreadsheet to show that

it makes economic sense isn't enough.

There's a thing called culture,

the way people behave, the way they work.

Atari was the first genuine Silicon Valley

Age of Aquarius company.

As in many cases, entrepreneurs who create

great businesses, were not meant to run them.

I see Atari more of a case of that than anything else.

As in every Silicon Valley company from then on,

handling technology was the key to success, or failure.

Atari didn't really have much of a plan

for what was going to happen next year.

Warner attempted to make it into a company

with long term plans, long term goals.

It's hard to plan for, um, you know, brilliant ideas.

In a single moment, Atari lost control of its technology core.

You've got to obsolete your own products as fast as you can,

because if you don't someone else is gonna do it.

And I don't believe, now,

that that was our mindset at the time,

and I'm partly responsible.

Surely no one had envisioned the growing rate

that Warner would have been able to give to Atari.

Nobody, even Nolan Bushnell, had any idea

how big Atari was going to be,

or Bushnell would never have sold it

as he did to Warner for 22 million.

The fundamentals of the business were very easy to learn.

I felt that the nature of man is to play,

that there have been games throughout history

and games have always taken on the technology of the time.

The video game technology was digital technology and now

it allowed you to have unique rules, and motion,

and dynamics, and speed, and simulation.

At one point the medium itself became

the drive for the video game success.

This exciting new thing to do is what made it big.

It was a natural thing, and it was huge and so it took off.

And then Warner money, with Manny Gerard's

and Ray Kassar's skills,

made it happen on a never expected scale.

While it was a terrific experience

for me we all felt we were doing

almost something historic and would go down in history.

Since he really didn't understand how

the success was made in the first place,

when it turned around, he had no idea how to fix it either.

Sadly, Manny Gerard can only conclude

that it was too hard to master.

It's the nature of companies that nothing

grows straight-lines to the moon.

The mark of a great management is not managing the upside.

Everybody manages the upside well.

It's managing the downside,

and very few people manage the downside well.

No one was ever able to cut overhead enough to survive.

You've got to really go, and not cut costs 15 per cent,

you've got to cut costs 45 per cent,

and emotionally it's impossible to do.

I'm not envious of Ray Kassar's position in that thing.

1982 was the perfect representation of a nightmare.

You come in and they say, "OK, it looks like this," and you

come in two weeks later and, as I said, it's down ten percent,

and two weeks later it's down another ten percent,

and it was just chaos.

There was no fixed point that stayed

solid for more than ten minutes.

Atari had a fate that no one from the

inside could actually see or avoid.

The fact is, the industry which had grown like a rocket

fell back dramatically, but the basic business didn't go away.

Atari's legacy exists on several levels.

The people at Atari contributed dramatically to shape

the digital revolution of the 8-bit generation.

People like to tell me the story

about the first time they saw Pong.

They like to tell me the stories about how they

met their husband or their wife playing Pong.

People like to tell me how excited they were

when they got the 2600 under their Christmas tree.

How it was the most important thing that

happened in their childhood, things like that,

and it's gratifying, it's fun.

Atari was also the testbed for companies

based on creativity and technology alike.

The environment there was

unique in the freedom that they gave us to be creative,

to try different things, because we were

doing things no one else had done before,

and to this day it remains the single

most talented collection of

individuals I've ever worked with.

Nolan Bushnell started the Aquarium business style

that rules Silicon Valley to this day.

But more than that he introduced people, all kinds

of people, well-educated college professors,

working class folk, and legions of kids,

to the upcoming digital world.

For some reason that I don't quite understand is that

I have been able to be a business chameleon.

If I'm dropped in a pond of

marketing guys I can talk marketing.

If I'm dropped in a pond of

engineers, I can talk engineering.

You know, people call me a visionary but

I'm not really sure what that means.

The Atari ride stands as one of the

most unforgettable experiences

for anyone who was involved.

The Atari experience for me, good and

bad, is not an experience I would trade.

It was a great education, it was one of the great rides up

and, as we all know, one of the great rides down.

Trust me, up is more fun.

[ominous music]

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