In 1983, the video game industry saw its biggest financial crash in its history, and at the center of it was worst game of all time and resulted in such a huge loss for Atari that the games ended up being buried in the middle of the desert. E.T.'s rushed development schedule, overproduction of stock, and horrendous gameplay led to the biggest disaster to ever shape the industry.
Many have likely heard of E.T. The Extra-Terrestrial at some point during their lives. In 1982, Steven Spielberg released E.T. and the movie quickly became a global phenomena. At the time, Atari was also on the rise as the largest video game console manufacturer and saw the success of E.T. as a promising collaborative opportunity. After about two months of persuasion, Atari was able to attain the rights to E.T. and they began production of the game for the Atari 2600.
From the start, E.T. was on shaky ground. Given that the licensing was attained in August and the holiday season was only a few months away, there wasn't much time to spare. Considering the time needed for manufacturing, the game had to be produced entirely from scratch in approximately five weeks. For reference, Atari's successful Raiders of the Lost Ark title took about five months to design alone. This tight schedule allowed for little play-testing and bug-checking to ensure the game was functioning as intended. Even so, the game was completed on schedule and Atari went on to produce 4 million cartridges just in time for Christmas. Given that they anticipated the game to be a major success, they decided overproduction would be a safe option.
E.T. Decimated The North American Video Game Industry
At the start, sales were strong and the game seemed promising, but it didn't take long for matters to sour. Given E.T.'s rushed schedule, the gameplay took a major hit. The game was rather simple: players take on the role of E.T. and collect special parts in an attempt to create a phone and return the alien to its home. Unfortunately, one of the core mechanics were avoiding a massive slew of pits. Due to the game's poor design, it was far too easy to fall in, and the process of levitating out of these pits was quite troublesome, often resulting in players falling back in again. During these moments, it was possible for E.T. to also get abducted by the FBI, resulting in the player losing all that they had collected. This horrendous gameplay had many children upset and resulted in hordes of angry parents returning their purchase and demanding a refund. Many retailers in turn sent those cartridges back to Atari.
These mass returns quickly took their toll on Atari. The game, which was originally sold for around $50 at the time, was suddenly barely selling for a dollar. By the time Atari opted to completely remove the game from circulation, the company had lost approximately $100 million. While Atari was the heaviest hit by this loss at the start, a shockwave spread to the rest of the industry. People felt betrayed by video game companies and revenue dropped across the board. E.T.'s impact lasted for about two years, at which point the market lost almost 97% of its total revenue. Atari's failure became a catalyst for the Video Game Crash of 1983.
The industry's collapse seemed like the end. It wasn't until Nintendo emerged with the second generation of video game consoles in 1986 that the North American video game industry began to recover. For the longest time, it seemed Atari's failure with E.T. The Extra-Terrestrial was the end for the games industry as we know it. It took years for the industry to gain back the trust of its consumers and stabilize, all because one little alien was rushed to phone home.
