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The Many Deaths of the Atari Empire

Published: September 6th, 2021

Author: Caitlynn Joann


If we’re going to get into the long-winded tale of Atari and its many deaths, (try to keep score along the way), we should start from the very beginning. While there are many famous names thrown around such as Nolan Bushnell, Steve Jobs, and Steven Spielberg; Atari’s history is anything but glamorous.

Known as the “founding father” of the gaming industry, Nolan Bushnell was born in Clearfield, Ohio on February 5th, 1943. I’ll go ahead and skip to his college career and spare you the typical midwest childhood memories. Bushnell went on to study engineering and business at Utah State University in 1961. He later transferred to the University of Utah’s College of Engineering in 1964 where he became a member of Pi Kappa Alpha and graduated with a Bachelor of Electrical Engineering. His job history in college included managing the games department at Lagoon Amusement Park, Litton Guidance and Control Systems, Hadley Ltd., and his very own advertising company, Campus Company.

After moving to California post-graduation in hopes to work for Disney, Bushnell found himself working for Ampex as an electrical engineer, where he thankfully met Ted Dabney. Dabney expressed interest in similar technological hobbies as Bushnell and introduced him to Spacewar! in a computing lab at Stanford University. In 1969 Bushnell and Dabney formed Syzygy where they produced Computer Space, building a prototype and landing Nutting Associates as their manufacturer. A few years later in 1971 Computer Space was born and Syzygy became Atari, the name of a turn a player could make in the game Go, Bushnell’s favorite game of all time. Atari started in Sunnyvale, California, renting their first office from Bally Manufacturing and hiring another engineer, Allan Alcorn, (yes that is his real name). Alcorn was provided with a “tennis game” project by Bushnell, incorporating industry-changing advancements, such as the ball increasing its speed as the game progressed. As you guessed it, Pong was born.

In 1973 an unfortunate falling out between Bushnell and Dabney left Bushnell buying Dabney out of his shares for $250,000. Atari sought manufacturing help from Joe Keenan, who established Kee Games earlier that year. Atari was facing difficulty meeting production demands and endured financial hardships keeping up with the fast-growing industry. Later this year, Steve Wozniak is hired as their first circuit board creator and Steve Jobs, yes BOTH Apple founders, as circuit board technician and designer. Bushnell later shares he is the only person to ever employ Steve Jobs, as he created Apple during and after his employment with Atari. As close as “the Steve’s” became, Wozniak sadly later shares in an interview he discovered Jobs had tricked him into designing a game where Jobs received majority profit. Wozniak was approached to create a new breakout game where Atari would offer a bonus should the number of chips be kept to a minimum - a bonus Wozniak wasn’t informed of. Wozniak worked four days and three nights to complete the game where he only received half of what he believed to be the base rate. Wozniak learned this almost a decade later in a book titled, “Zap,” covering the history of Atari.

In 1974 Atari and Kee games merged, before the release of “Tank.” This game's success helped boost Atari financially and while Bushnell maintained his role as CEO, Keenan became the president of Atari. The following year Pong consoles were released as a home electronic and Bushnell was given an offer of a lifetime that, still today, we cannot believe he turned down. Jobs and Wozniak approached Bushnell about investing in Apple I. They built a computer from borrowed Atari parts and offered the design to Bushnell and Atari. Bushnell declined, wanting to focus on the arcade industry. Jobs then offered Bushnell one-third equity in Apple Inc, for $50,000 and he again turned it down. Later in interviews, Bushnell states in hindsight he has no regret. Had he taken the deal, he may not have the success in his businesses and the family that he has created. I don’t know how he lives with it- what a, “once in a lifetime” chance!

1977 rolled around and before Atari 2600 was released, Bushnell realized he needed a more rapid development process and sought out a buyer- Warner Communications. Warner hires Ray Kassar to push Atari’s marketing to the next level and Bushnell becomes worried about Kassar's plan to produce too many units. This leads Warner to believe that Bushnell is no longer a “good fit” for Atari and was removed as CEO and Chairman the following year, after Atari 2600s release. Bushnell was offered the opportunity as a director and creative consultant but was declined. Bushnell perseveres and establishes the first Pizza Time Theatre in San Jose where Atari can stock their arcade games. Warner Communications acquires Atari for $28 million, with Bushnell receiving $15 million. Before leaving, Bushnell negotiated his rights to Pizza Time Theatre from Atari for $500,000. I’ll spare you the Google search, but not the nightmares, and provide an image of the animatronics. View at your own risk.

As you can imagine, Kassar replaced Bushnell and Atari Inc.'s sales grew from $75 million in 1977 to over $2.2 billion in 1980. It is said the lack of royalties or recognition for staff led to the original team quitting or being let go and fingers pointed towards Kassar for the high turnover rate. Kassar’s biggest regret was waiting around the corner but he had his greed to blame for his self-sabotage. Four programmers dissatisfied with their pay decided to ask Kassar about an opportunity to earn a commission. Their argument, they were the game designers, bringing in millions in revenue for Atari. David Crane remembers the cold response of, "You are no more important to that game than the guy on the assembly line who puts it together." Crane and his three co-workers resigned and formed Activision, the first-ever third-party developer.

Over the next few years, Missile Command is released and Atari hires Howard Scott Warshaw, known for designing Yars’ Revenge and Raiders of the Lost Ark. Warshaw shares the name, Yar Razak, derived from spelling Ray Kassar backward and states it was Kassar’s “revenge” on Activision. In 1983 Steve Ross, CEO of Atari’s parent company Warner Communications, discussed with Spielberg and Universal Pictures over the opportunity for an E.T. game based on the blockbuster movie. Kassar expressed he thought it was a bad idea as they have never made an action game following a movie but, at the end of the day, it wasn’t his decision. Atari Inc. ultimately paid between $20-$25 million for the rights in July, which was an astronomical number for game licensing in the 80s.

Warshaw was approached to begin working on E.T. in 1982, where he would only be granted five weeks to create this intricate game, as they just received licensing and Atari wanted the game released in time for the holiday season. In December, E.T. was released and met with immense negativity while demand was overestimated and the game was “overhyped and a let down” given the movie was, and still is, a huge success. In 1984 Atari 7800 Pro system gaming console was released and in July, the original Atari Inc. was split into two divisions. If you’re keeping track, this is Atari's first “death.”

The original Atari portion became Atari Games, Inc. created by Warner. The other portion of Atari regarded home hardware and software, as well as maintained the rights to classics such as Pong, Centipede, Breakout, Asteroids, and Missile Command. This portion was purchased by Jack Tramiel for $50 cash and $240 million in promissory notes and stocks. Tramiel attempted to keep his portion afloat through the Atari ST computer, Atari Lynx portable game player, and the Atari Jaguar home console. His failed efforts lead to Atari’s second “death” as pieces were sold off to Hasbro Interactive in 1998.

Infogrames Entertainment, a French conglomerate, purchased GT Interactive and a controlling interest in Hasbro Interactive, conveniently including the scraps of failed Atari Inc. Met with a big sigh, this is the third “death” of Atari. GT Interactive then began to publish games under the Atari label. It doesn’t take long for Infogrames Entertainment to realize no one knows who they are nor do they care. So naturally, they renamed Infogrames Entertainment to Atari Inc. and Infogrames Interactive to Atari Interactive in 2003. This is where things go off the rails so I'll try not to lose you. The new “Atari Inc.” has absolutely nothing to do with the original company at this point as all of the original players have left (I had to squeeze a pun in somewhere I couldn’t help it). In 2002 Atari purchased Shiny Entertainment before selling them in 2006. In 2004 Atari sold the Civilization series to Take-Two Interactive for $22.3 million and in 2008 purchased Cryptic Studios before selling it in 2011.

It’s sad to see the French-based company sporting the Atari name, yet wasn’t around when Atari was founded and only received the rights to the name through acquisitions of the original company. We now see their bankruptcy filing has more to do with the abandonment of the company and lack of revenue since 1999, than with the original Atari company. Even today the US branch of Atari is filing for bankruptcy, reportedly to escape the debt of the French company, which just wanted the rights to the Atari name.

As most things do, things come full circle for Atari as two old friends make a comeback, Nolan Bushnell and Tim Virden, who join the board of directors for Atari in 2010. Bushnell has always expressed computer games to be a way to, “foster curiosity and creativity in a social context.” We can all agree Bushnell has truly revolutionized the entertainment industry and continues to do so in his current, thriving businesses.



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