The Strange and Surprising History of the 1983 Video Game Crash | History Hit

The Strange and Surprising History of the 1983 Video Game Crash

Andrew Kersley

14 Dec 2021
Image Credit: STOCKFOLIO®, ClassicStock / Composite: History Hit

Video games usually intersect with the subject of history in popular culture in the way they depict events, people and places from the past. But the history of the video game industry itself is a fascinating journey marked by peculiar twists and turns. Few landmark moments are as beguiling as the devastating 1983 recession.

It’s hard to imagine in a world where the video game industry is worth over $145bn globally, making it the biggest entertainment sector, but just a few decades ago people were predicting the death of the industry. After years of non-stop growth in home gaming consoles, the industry entered the worst recession of its history.

In two short years, the industry shrunk by 97% from an estimated value of $3.2bn. Telling that story not only reveals a fascinating insight into the way gaming once functioned, but also furnishes some of the most bizarre stories of the medium.

Why it happened

To put it simply, there was too much of everything. First off, consoles. There were literally dozens of choices of consoles in the 80s compared to the more limited selection now. Each then came with its own exclusive set of games, resulting in a fractured market.

Then there was a complete oversaturation of games themselves. Countless terrible games flooded the market, ranging from inferior adaptions of films to corporate video games made to sell dog food. They were made by unlicensed developers over whom console companies had no control. Their numbers skyrocketed.

On one level, the problem here was that there were only so many people who could play games. The growth in users couldn’t match the sheer number of games being released. The other issue, simply put, was that a lot of these games were terrible: gamers didn’t want to buy them. With the rise of personal computers, they didn’t have to.

The great porn game boom

Nothing quite encapsulates that explosion in low-grade, eccentric titles than the pre-recession boom in pornographic games. While a never-ending stream of console games was being produced for Atari, some developers thought sex might be their way to make a mark.

A litany of obscene games was released on the doomed Atari consoles: X-Man, Custer’s Revenge and Bachelor Party, to name a few. All of them were deeply vile productions, pervaded by intense sexism and racism. They were also rubbish games by all accounts.

Games and landfills

One of the most infamous games to come out ahead of the recession was 1982’s E.T. The Extra-Terrestrial. A mix of odd controls and nonsensical mechanics left the player searching for telephone parts in barely discernible wells for some reason. Add to that poorly designed, inescapable pits, which made navigating this 8-bit nightmare an unpleasant experience.

In fact, E.T. The Extra-Terrestrial is so bad that it’s seen by many as the final nail in the coffin for console manufacturer Atari. In the years that followed, rumours started to develop that it had sold so poorly that the company had been forced to secretly dump thousands or even millions of copies of unsold game stock into a landfill.

Partially-surviving cases and cartridges retrieved during the 2014 excavation

Image Credit: taylorhatmaker, CC BY 2.0

Long dismissed as an urban legend, despite contemporary coverage by the New York Times, an excavation at the site of the alleged landfill in Alamogordo, New Mexico in 2014 proved that it was partially true. Excavators found hundreds of copies of the infamous game, along with an array of other poor selling games from the era.

In a strange twist of fate, the unearthed games were auctioned by the local city council. They raised over $107,000 selling 880 unearthed cartridges. One copy of the once unsellable E.T. went for over $1,500.

Randy Horn shows his personal copy of “E.T. the Extra-Terrestrial” at the old Alamogordo Landfill dig site in Alamogordo, New Mexico, April 26, 2014. Horn worked at the landfill from 1979-1989 and was on hand when the Atari cartridges were buried.

Image Credit: Alamy


Overall, the impact all of this had on the video games sector was massive. For one, it almost killed the entire US console industry. Countless developers went bankrupt. Most famously, the formerly dominant games company Atari lost some $356m. It was forced to lay off 3,000 of its 10,000-worker staff by the middle of 1983. It never truly recovered.

In 1985 the western release of the classic Nintendo Entertainment System (NES) reignited passion for the console market, and helped it slowly rebuild, then accelerate to the level it has reached today. That intervention helped establish Japanese companies like Nintendo, Sony and Sega as serious presences in the global industry of video games.

Lessons learned

It also changed the way games were developed. One of the primary causes of the crash was the fact that console developers couldn’t control who was making games for their devices. The reason you won’t be able to find non-Nintendo games on a Nintendo console is because they don’t want their devices to go the same way as the Atari.

The crash shaped gaming in this way and others. Some elements proved more instructive than others. Despite the part he played in the video game crash of 1983 and the demise of an industry titan, E.T. continued to feature in countless adaptations in the following decades.

Andrew Kersley