Introduction
In the contemporary society, video gaming is a very popular phenomenon now. In 2009, the aggregate computer and video games revenue in the United States is approximately $10.3 billion and around 67% of the households in America own some variety hardware of video game entertainment. The origin of video gaming technology begun in late 1940s with the invention of early cathode ray tube based missile used as mechanism of defense. During 1950s these programs were further simplified for different basic games. Most computer games started to develop during the late 1950s and early 1960s in the mainframe computers platforms with gradual complexity and sophistication (Donovan, 2010). After this period, video gaming technology was introduced into various different platforms like mainframe, arcade, personal computer, console and later handheld games.
In 1971, the first commercially viable game named “Computer Space” was launched in the market. This was the beginning of the budding video gaming entertainment industry in Japan, United States and Europe. For the leading companies in market the first major setback was the crash o 1977 when they were forced to sale out their obsolete and older system that flooded in the gaming market. The second crash was faced by the industry after six years in 1983 that resulted in a complete disaster in the gaming console market in United States that shifted the dominance of computer gaming market to Japan. Although the console market was immensely affected but the computer based games were unaffected. Many European and North American companies endeavored to introduce the fourth generation of video gaming consoles but it failed to get a market acceptance. This cycle of failure finally ended with the introduction of sixth generation of video gaming consoles. This major market setback was mainly due to the change of platforms from consoles to computer. History is a witness that no matter how strong an industry is, the scenario can completely change with the change of platforms. The instances of Typewriter market and photographic film is important to understand that how the change of platforms can result in sudden disasters. The same sorts of shift are now visible as there is a major shift from personal computers to Smartphone and Tablets for gaming. Companies that are fine with this shift will be able to survive in the market and others will suffer the same fate as the companies faced in 1983.
Industry Crash of 1983
There were multiple causes of this crash but two major causes remains the low quality games saturation in the market that shook consumer trust level. The second reason was the change of platforms and major shift to personal computers.
Flooded Console Market
During the period when the United States gaming market crashed there were numerous consoles in the market including Atari 5200, Atari 2600, Coleco Vision, Astrocade, Emerson Arcadia Coleco Gemini, Fairchild Channel F System II, The Mattel Intellivision, and Magnavos Odyssey2and more. Many of these consoles had their own libraries (third party) and many had their own games’ libraries. During the same time many companies were launching their next generation of games for 1984 such as Atari 7800 and Odyssey3. During that time there were many hastily financed startups were introduced in the market that had poor titles. Poor reviewed games from companies like Atari during the same time was icing on the cake that further contributed to the crash. Additionally, Atari 2600 which was leading the market at that time was in its sixth year and it almost reached a point of saturation (Wolf, 2012).
Competition from Home Computers
For electronic hobbyists, the initially launched microcomputers like Apple I and Altair8800 were mainly toys and it normally required kit assembly. The major turnaround occurred after the introduction of preassembled machines like Trio of 77, Commodore PET, TRS-80 Model I, and Apple II were available in the market and it had BASIC programming in ROM. Commodore PET and TRS-80 benefit were sold under $1000 at retail outlets and Radio Shack’s electronic outlet benefited TRS-80 and it became visible over the retail outlets, while at that time major manufacturer required mail order to deliver the systems. The sales of personal computers were booming in the year 1982.
During that time, the personal computers had better sound and graphics quality with more memory available in comparison with a console. They offered better quality games and it had its utility in home accounting and word processing as well. The games in these computers were easy to copy through a floppy disc; on the contrary these consoles used ROM modules. The phenomenon of storing games in progress was also allowed by writable storage medium. These sophisticated qualities offered the personal computers an edge in comparison with games consoles. The arch-rivals Atari adopted a new strategy and targeted specifically the video games players through its advertising and promoted Commodore 64 by marketing the notion that college bound children do not need a video games; rather they need computers.
Although, various advertising campaigns provided many setbacks to the video game industry, this industry was further dragged down by the video game crash. Gaming remained a major contributor and inclination for computer sales but after this crash, this phenomenon enhanced exponentially. Just like the console market, the market of computer was also oversaturated and increase in competing platforms (Bissell, 2010).
These events are also relevant today because technology changes at a very fast pace. Changes of platforms and market crashes can also be seen in today’s technological landscape. Few years back, for communication over internet people use to have MSN Messenger and Yahoo Messenger but these platforms have lost its luster due to the new phenomenon of social networking websites. Through platforms like Facebook and Twitter, people are not connected to certain selected people but now they are connected to an entire virtual world. The same situation happened in the scenario of gaming consoles.
Effect of Inflation on Gaming Industry
In the early 1980s, inflation affected the American gaming industry adversely. It decreased the spending power of potential consumers. The target market of gaming industry had been switched from video gaming consoles to desktop computers. In 1980s, Inflation had reduced the purchasing power and it adversely affected the American gaming industry. People spent less on buying video games, which made it difficult for the video gaming industry to prosper. The American gaming industry did not manage to remain stabilized. One of the reasons that Japan gaming industry remained stable was that, Arcade machines standardized the use of ¥100 coins.
Gaming Crisis and Publishing Loss of Control
Atari programmers left the company in 1979 because Atari did not allow credits to appear on the games, employees were not paid royalty on their sales, and Activision was established. Warner communication owned Atari and the developers started to depict their willingness to receive the same level of recognition that Warner’s directors, musicians and actors got from other divisions. Atari tried to block sales of Activision products just after Activitision went into the business. However, Atari did not succeed in their attempt and the case was settled down in 1982. Third-party development was legitimized by this court case and companies were encouraged to open gaming division in order to impress consumers and stockholders. Companies used reverse engineering and lured away competitors’ programmers in order to understand the best possible ways to make games for proprietary systems (Fromme, 2012). Atari lost the programmers who were hired from Mattel's Intellivision development studio. Mattel on the other side learnt from the Atari loss and continued to avoid the credit game designers. The console manufacturers lost control over the supply of video games, those console manufacturers were Microsoft, Nintendo, Sony and Sega. At that time, desktop computers captured the console manufacturers’ target market, and now the smart phones and tablets have grabbed consumers’ attention.
The new and non-veterans programmers entered into the gaming industry with the hope of taking competitive advantage over the existing giant companies i.e. Atari, Activision and Mattel. Those companies launched new games and heavily invested on their marketing and advertisements budget. The American video game industry faced tremendous loses because of video game’s poor quality (Fields, 2010). Those video games damaged American video gaming industry severely. Today, emerging demand of Smart phones and tablets by numerous reputed companies like apple, Samsung etc are attracting the target market of video console manufacturers.
Immediate Effects
In 1982, numerous games entered into the gaming industry, which flooded the market. There were majority of the stores, which did not have adequate space to carry new consoles and games. Due to inadequate space, retailers started to return abundant video games to the new publishers however, those publishers were not able to return cash back to the retailers. The titles of the unsold games were marked down and placed in sales tables and discount bins by the retailers after they did not receive cash from defunct publishers. The expensive gaming market was shrunk dramatically and the cheap and low quality video games rushed into the market, which faced huge loss, as well as, damaged the video gaming industry. Today, video gaming industry is also going through crisis because of the increasing demand of smart phones and tablets for gaming purpose.
In the video gaming industry, consolidation is not normal. The console games are prepared for growth, as Nintendo has launched new console whereas, new systems have been expected to be launched by Sony and Microsoft in the coming year. The video gaming industry is going to be in financial turmoil, because the third largest publisher THQ collapsed. The company thought to sell to the private investors, unfortunately due to creditors’ pressure it allowed individuals to bid over company’s assets. The company is now divided up among Sega, Ubisoft, Take-Two Interactive Software and others. The video gaming industry is witnessing video game manufacturers collapse due to increasing demand of smart phones and tablets as gaming devices. Collapse of console giants depicts that in the next generation the consoles will be fully replaced by smart phones, tablets and some other advance technology (Eade, 1996).
Similarly, in 1980s the toy retailers concluded the fact that the video games demand decreased and replaced by different products like computers. Nintendo confronted this barrier when it tried to market its new system i.e. Famicom system in U.S. market. During 1980s, the video games sale dropped down and this resulted in bankruptcy of numerous gaming companies.
Video Gaming Industry and Effect on World
During the mid-1980s, the United States market was moving away from cassette storage and eight-bit computers, on the other side, technology moved with a slow pace in Europe. By the end of 1980s, video game consoles had less market share in the European market. Today, the mobile phones, smart TV games and social networking sites replace the home computers. It is expected that the mobile gaming segment will hold 15% of the market share until 2016. In Japan, the gaming market was less affected from rest of the world i.e. Europe and U.S. In Japan, the desktop computers were never become widespread and consoles remained the popular gaming form. Japanese home market products were of high prices, that was the reason, the consoles were dominant there (Fields, 2010).
Thus, the facts above depicted that video gaming industry has been facing crisis since 1980s. The console market was replaced by the home computers and now smart phones, tablets and social networking sites are replacing desktop computers.
Preventive Measures
Numerous efforts have been made after video gaming crashed of 1983. Nintendo imposed a policy for its consoles on game developers. According to that policy, a licensee may produce for five games yearly for a Nintendo console. This policy was helpful for preventing market oversaturation. However, that was thwarted in various ways as company named Konami was willing to product more than one games and formed games for Nintendo's consoles like Palcom and Ultra Games in order to make different publisher technically. The policy discouraged small companies, as they could not afford to commence additional firms.
References
Bissell, T. (2010). Extra lives: why video games matter. New York, NY: Pantheon Books.
Donovan, T. (2010). Replay: the history of video games. East Sussex, England: Yellow Ant.
Eade, V. H. (1996). Overview of gaming. Las Vegas, Nev.: UNLV International Gaming Institute
Fields, T. (2010). Distributed game development harnessing global talent to create winning games. Burlington, MA: Focal Press.
Fromme, J. (2012). Computer games and new media cultures a handbook of digital games studies. Dordrecht: Springer.
Wolf, M. J. (2012). Before the crash early video game history. Detroit: Wayne State University Press.
