Golden age of arcade games In the early-1980s, arcade games were a vibrant industry. The arcade video game industry in the US alone was generating $5 billion of revenue annually in 1981 and the number of arcades doubled between 1980 and 1982. The effect video games had on society expanded to other mediums as well such as major films and music. In 1982, "
Pac-Man Fever" charted on the
Billboard Hot 100 charts and
Tron became a
cult classic.
Third-party development and an oversaturated market Following a dispute over recognition and royalties, several of Atari's key programmers split and founded their own company
Activision in late 1979. Activision was the first
third-party developer for the
Atari 2600. Atari sued Activision for
copyright infringement and theft of trade secrets in 1980, but the two parties settled on fixed royalty rates and a legitimizing process for third parties to develop games on hardware. In the aftermath of the lawsuit, an oversaturated market resulted in companies that had never had an interest in video games before beginning to work on their own games and acquire software houses, for instance,
Parker Brothers, the board game giant owned at the time by
General Mills, developed video games, which spurred the acquisition of
U.S. Games by
Quaker Oats to compete. The market was also flooded with too many consoles and what were seen as too many poor quality games, elements that would contribute to the collapse of the entire video game industry in 1983.
American video game crash of 1983 By 1983, the video game bubble created during the golden age had burst and several major companies that produced computers and consoles had gone into
bankruptcy. Atari reported a $536 million loss in 1983. Some entertainment experts and investors lost confidence in the medium and believed it was a passing fad. A game often given
poster child status to this era,
E.T. the Extra-Terrestrial had such bad sale figures that the remaining unsold cartridges were
buried in the deserts of New Mexico.
Rise of computer gaming The brunt of the crash was felt mainly across the home console market, localized within the United States. Home computer gaming continued to thrive in this time period, especially with lower-cost machines such as the
Commodore 64,
ZX Spectrum and
IBM Personal Computer. Some computer companies adopted aggressive advertising strategies to compete with gaming consoles and to promote their educational appeal to parents as well. Home computers also allowed motivated users to develop their own games, and many notable titles were created this way, such as
Jordan Mechner's
Karateka, which he wrote on an
Apple II while in college. In the late 1980s,
IBM PC compatibles became popular as gaming devices, with more memory and higher resolutions than consoles, but lacking in the custom hardware that allowed the slower console systems to create smooth visuals.
American rejuvenation By 1985, the home market console in North America had been dormant for nearly two years. Elsewhere, video games continued to be a staple of innovation and development. After seeing impressive numbers from its
Famicom system in Japan,
Nintendo decided to jump into the North American market by releasing the
Nintendo Entertainment System, or NES for short. After release it took several years to build up momentum, but despite the pessimism of critics it became a success. Nintendo is credited with reviving the home console market within the United States. == Notable video-game franchises established in the 1980s ==