How Did E.T. Destroy the Video Game Industry?

James Logie

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The E.T. Atari video game is thought to be one of the worst games of all time — if not the worst.

It’s also been associated with destroying Atari and bringing the video game industry to its knees.

This is a story of not paying attention to the market, arrogance, short-sightedness, and how eight-year-olds can help destroy a business.

Atari was the king of video games in the early ‘80s, but this goes to show what can happen when a business thinks nothing can derail them.

This is the story of the great video game crash of 1983.

“E.T.” the Movie

Everyone knows “E.T.” was released in 1982 by Steven Spielberg. It told the story of an alien stranded on earth trying to get home.

When it came out on June 12, it was an immediate blockbuster. Most people don’t realize it actually surpassed Star Wars and became the highest-grossing film of all time.

This lasted for an incredible 11 years until another Spielberg creation, “Jurassic Park,” broke the record. It’s still considered one of the best movies ever made, was nominated for nine Oscars, and won four of them.

Like any big movie franchise, merchandising played a big role in the movie’s spread, and the opportunity to release a video game presented itself.

Any movie or TV show that comes out now seems to automatically have a video game associated with it, but this wasn’t common practice in 1982.

Development of the Game

Howard Scott Warshaw was the man behind the E.T. video game.

He was the creator of the insanely popular Yars’ Revenge game for Atari, and he had made a movie-based video game before.

This also involved Spielberg and “Indiana Jones and the Raiders of the Lost Ark.”

This was actually the first movie adapted into a video game and was a massive success — so it makes sense that Spielberg would go this route again by turning to Warshaw.

It took ten months to make Raiders, which included writing code, getting feedback, reprogramming it, and putting it through quality control.

This is still a very quick time to turn around a video game.

Keep that in mind.

The Most Important Time of the Year

The enormous problem they faced in 1982 was getting any form of video game out by Christmas. For a new toy or product, the holiday season is, of course, absolutely paramount — but Spielberg and Atari were haggling over money for months.

This was really cutting into the game design time.

By the end of all this, they only had five weeks to make the Christmas deadline.

But Warshaw said he could do it.

He only had 36 hours to come up with the concept of the game. Spielberg wanted something like Pac-Man, but with E.T. having to eat Reese’s Pieces.

Warshaw wanted to make something elaborate involving E.T. going to different worlds as opposed to being stuck on one screen like so many other games.

Spielberg eventually signed off on the game and Warshaw was now under the gun. He even had a console installed in his house to work on it around the clock.

But he did it. He completed a video game in five weeks, and the hype for this game was through the roof.

But when kids finally got ahold of it, it didn’t exactly live up to expectations.

Gameplay Problems

The fundamental problem is the absolute frustration in playing this game. Not only that, but it was absurdly confusing. I remember playing this with my neighbor and not understanding what the hell was happening, or what we were even supposed to do.

All you knew is you had to collect some pieces of a telephone (to phone home, get it?) and avoid government agents trying to catch E.T.

Since there were multiple worlds and you could go in every direction, there was no flow or progress to the game. It’s not like a Mario game where you knew you were continuously moving from left to right.

You would constantly fall into pits, move out of the pit, and into other screens where you instantly fell down one again.

Kids generally will stick with a game, providing that the gameplay is good — but that wasn’t the case here. A great game should leave you wanting more, and the sentiment here was: This sucks.

What Was the Initial Response to the E.T. Video Game?

Even if kids hated it, there was no way to share this at first. Even if the internet, social media, and texting existed, most eight-year-olds wouldn’t have had access to that, anyway.

It would all have to come by word of mouth — but that could take a while back in the ‘80s.

Since there was so much hype for the E.T. game, the initial sales were really strong. E.T. was at the top of the charts for video games, reaching number four in the top 15 of the year. It also sold 1.5 million copies.

But Atari made four million of them.

Retailers started reporting that E.T. was not meeting expectations sales-wise.

Low sales combined with excess inventory — added to kids hating and returning it — is like the perfect storm of retail hell.

There are some reports that there were more E.T. video game cartridges made than there were Atari units.

So now you’ve got a huge movie that is universally loved and praised, and the video game version which kids were using as frisbees.

They put a lot of money into the licensing of this game and they were not seeing the returns.

There was now becoming a real negative association with E.T.

But it would get worse.

The Backlash and Downfall of Atari

Atari had been on top of the world. In the early ‘80s, they were basically the only game in town and could put out any game that they wanted.

This resulted in some truly awful games flooding the market.

But what were you going to do, go play Nintendo? Sorry, that didn’t even exist yet — so you were stuck with the terrible games put out by Atari.

However, other competitors were entering the market (the NES would come out in 1985).

E.T. was giving the Atari 2600 a horrible name, and people were distancing themselves from the console.

It wasn’t the primary factor, but the failure of the E.T. video game was connected to Atari losing $536 million in 1983.

It was also said that the failure of the E.T. video game was responsible for ending the product life of the Atari 2600.

Add to this that the home computer was now taking off.

There was the Apple I and the Commodore 64, which were more advanced machines and capable of much more than just playing a game.

The big move happened when these computers cut their prices in half — notably the Commodore 64.

Why would you buy a video game system when you could get a better value home computer that played video games too?

The Writing Was on the Wall

When you combine this along with the flood of terrible Atari games that were on the market — and the monumental failure of the E.T. game— it started a snowball effect with Atari and the video game industry.

Retailers started stocking fewer Atari video games and total US console sales dropped from $3.2 billion in 1982 to only $100 million in 1985.

Rumors even started to fly about millions of cartridges being buried in a landfill in New Mexico.

Atari’s value ended up dropping by $1.3 billion and shares lowered from $54 to $34. Even in 1982, their revenues were cut by 50%.

They thought that would be the worst of it, but the company was divided up and then sold in 1984.

Wrapping It Up

The story of the E.T. video game by Atari is an absolute classic. It’s a grand example of companies getting too cocky for their own good and the fallout that can happen. In Japan, they called it “Atari Shock.”

And it all comes down to a lack of quality.

It’s also an amazing story of how eight-year-olds didn’t want to accept a lackluster game and helped to take down an entire industry.

Nintendo would turn the industry around and make it bigger than ever, but it seems weird to think that for a brief period in the ’80s, video games were dead.

The E.T. video game is probably not the worst video game ever made — but it might be the most disappointing.

This all goes to show how nothing is worse for a company than indifference from their customers, and how rapidly an industry can go into a tailspin.

photo via Wikipedia

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Personal trainer, podcaster, Amazon best-selling author. Writing about some health, a little marketing, and a whole lot of 1980s.

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