From Business History: How E.T. The Extra-Terresterial Destroyed Atari
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What is the background story of Atari's rise in the gaming industry?
Hey, snafu fans. It's Ed. Today, I'm coming to you with an episode of a podcast I have been loving. It's called Business History. Hosts Jacob Goldstein and Robert Smith, former Planet Money guys, dig up the wildest, most, wait, what? Stories about businesses big and small, like how Hitler's favorite car became the ultimate hippie vehicle or why Thomas Edison got mixed up in the invention of the electric chair. Every episode is a masterclass in how fascinating people built something incredible and either watched it soar or burn to the ground. Either way, it tells us something about how we run business today. Today's tale is really wacky. Fueled by hot tubs, recreational drugs, and a love of games, Nolan Bushnell took computer games out of research labs and into bars, launching an industry.
His arcade game, Pong, was a monster hit, so he set up Atari... to build a home games console, which became the must-have Christmas present of 1975. Atari was the name on every kid's lips, but then the investors came, and the investors brought pressure. Bushnell and his engineers were pushed aside as Atari expanded, and in a desperate bid to cash in on Hollywood hype, The company concocted a wild plan for a game based on Steven Spielberg's mega-hit E.T. the Extraterrestrial. Developed in mere weeks, it tanked and brought Atari down with it. Which is ironic because I remember the game E.T. on Atari when I was a little kid and I loved it. Anyway... Here's the episode. If you enjoy it, there's more tales of founders, business success, and spectacular failures on business history.
Available on YouTube, Apple, Spotify, or wherever you get your podcasts.
Robert Smith, here is the big question for today's show. Yes. How did Atari essentially invent the video game industry in the hearts of millions of young people in the 1970s and then blow up entirely in the early 1980s, basically never to be heard from again? It's a great question. We are both of the age where we remember this personally.
Yeah, I remember my dad coming home with one of the first Atari sets. It was like magic. What was it? It was Pong, which was a ping pong game, you know, with little paddles and you'd send a little electronic ball across the screen. And it was transformative because it was the first time you could actually interact with a television set, which was sitting there in the center of your home. And to be clear, I was not an early adopter. I was not cool at all. Everybody had the Atari set.
I'm a little younger than you, not to throw it in your face. But so for me, I don't remember Pong, but I remember the Atari 2600 came to be called the 2600, which was like the first video game system like we know it today, where you buy it and there's different cartridges. And this was, you know, the dominant video game in the early 80s. I loved it. I had Defender. I had Journey, the game Journey, like the band. Played it for hours. And so the big question is, what happened?
I'm Jacob Goldstein. And I'm Robert Smith. And this is Business History. What's it about, Jacob? Today on the show, how a company can invent something that changes the future, changes all of culture, and wind up in utter failure.
Like literally wind up having to bury hundreds of thousands of its own products, unsold video game cartridges, in a landfill in New Mexico.
I feel like today's show is like walking through my childhood.
How did Nolan Bushnell's vision shape Atari's early success?
We started with Atari, and our next step is... An amusement park that I initially called The Lagoon in Utah. And you pointed out... It is called Lagoon. And you know this because? Because I grew up in Utah and went there once a year, and it was the best day of the year. It's an amusement park, right? You play games, there are rides, you eat a lot of fried salty foods. It was amazing.
Robert, I guess you would have been going to Lagoon in the 70s. A few years earlier, it was this college kid named Nolan Bushnell who worked summers there. On the Midway, like where there was games, like whatever, guess the weight of the guy and knock down the milk cans or whatever.
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Chapters
5 chapters
1
What is the background story of Atari's rise in the gaming industry?
0:02–4:04
2
How did Nolan Bushnell's vision shape Atari's early success?
4:04–5:56
3
What led to the creation of the E.T. video game by Atari?
5:56–6:35
4
Why did the E.T. game fail so spectacularly?
6:35–14:38
5
What were the consequences of Atari's failure with E.T.?
14:38–51:46