Spring+2009+Lecture+7+Notes

= __Spring 2009 Lecture 7 Notes__ =


 


 * Channel F Changed Home Market – consumers no longer wanted single-game consoles
 * Even Prior to Channel F, Bushnell knew Atari needed new device
 * Game system which handled info like a computer
 * Turned to Grass Valley – Mayer found inexpensive microprocessor
 * MOSTechnologies 6502 – cheaper but more powerful than chip in Channel F and others
 * 6502 did not use frame buffer – generated images in real-time
 * Grass Valley built chip based on 6502 – codenamed “Stella”
 * Alcorn took Stella design back to Atari to manufacture – saw that it was too complex
 * Harold Lee suggested Jay Miner to build chip
 * Miner Chief Chip Designer at Synertech – company that made chips for Atari
 * Alcorn asked Synertech for Miner – Synertech refused
 * Promised that Atari would give Synertech all the business it could handle
 * Miner came on at Atari to head Stella project
 * System built around Stella – Video Computer System (VCS)
 * VCS referred to internally (and later renamed publicly) as the 2600 (named after its internal product-number, CX2600)
 * VCS – cheaper to manufacture than others – faster/more powerful
 * Was a computer with an 8-bit processor
 * Bushnell worried about “Jackals” - used similar strategy to earlier plans
 * Wanted to flood the market with VCS consoles and cartridges
 * Home Pong money had been used
 * Atari hurt their own arcade division – consumers less interested in arcades after home games became popular
 * Atari once again needed money
 * Did not want to turn to Valentine again – Bushnell held board meeting to discuss options
 * Make Atari public – sell stock
 * Stock market too weak – selling Atari itself was other alternative
 * In theory, company would remain the same – just new owners and more cash
 * Bushnell looked at film companies – Disney and MCA – not interested
 * Warner Communications showed interested
 * Warner owned by Steve Ross – NY Businessman
 * Ross wanted Warner to corner every aspect of entertainment industry
 * Hired Manny Gerard to help – Gerard considered best entertainment analyst on Wall St.
 * Gerard's job was to acquire new companies for Warner
 * Warner already in film, music, publishing
 * Gerard interested in Atari – videogames another aspect of entertainment industry
 * Gerard examined daily operations at Atari – felt it had strong promise
 * Recommended to Ross to buy the company
 * Ross intrigued with videogames – played Indy 800 with his kids at Disneyland
 * Ross had his lawyers contact Bushnell's lawyers
 * After 4 months negotiation, Warner bought Atari
 * Gerard recommended leaving Atari's management intact
 * Recognized Bushnell as heart of Atari
 * Also respected engineers and knew they were loyal to Bushnell
 * Further, Warner completely inexperienced in videogames
 * Buying Atari and removing Bushnell and other employees would be pointless
 * Gerard also felt that Bushnell and others would stop being motivated if they had too much money
 * Deal would give employees far less money than what would go into the company
 * After deal done, Warner bought Atari for $28
 * Bushnell remained CEO, Keenan stayed president, all other departments intact
 * Outside of money from Warner, Atari seemed to stay the same
 * Bushnell had money needed for VCS
 * Later said that promise of money pushed him to sell Atari
 * Some cartridge-consoles before VCS – Channel F, of course
 * January 1977 – RCA Studio II – second cartridge-based console
 * Studio II only competed against Channel F at first, but had big flaw – only B/W graphics
 * September 1977 – Magnavox entered field again – Odyssey 2 – color like Channel F
 * Odyssey 2 had full keyboard on unit – in addition to cartridges, unit itself was programmable
 * October 1977 – Atari releases VCS and 9 cartridges
 * Atari pushed VCS as best console available
 * VCS had dial-controllers for paddle games, like previous home game systems
 * Also had joysticks for other games – Odyssey 2 also had joysticks
 * Odyssey 2 joystick connected to console, VCS joysticks removable
 * VCS didn't have built-in keyboard – had some simple switches – difficulty and BW/Color
 * Odyssey 2's keyboard may have scared customers – PC's still not common
 * Atari sold VCS at low profit margin – made money on software
 * Cartridges cost $10 to make, sold for $30 – “Give away the razors to sell the blades.”
 * Videogames did not do well in 1977
 * Shipping problems from Atari – Many of the 400,000 VCS units didn't make it to stores
 * Customer confusion – too many similar products on market
 * Basic hand-held LED Sports games from Mattel and Coleco took interest away
 * Many customers simply not as interested in videogames in general
 * After Holidays 1977, Videogame market crashed
 * Both Magnavox and Atari began selling off inventory at slashed prices
 * RCA pulled out altogether
 * Tensions began to rise at Atari – conflicts between Bushnell and Warner
 * No longer owner of Atari, Bushnell's attention began to wane
 * Wanderlust struck – sought other interests, such as real-estate
 * Gerard's fear of money bringing disinterest seemed to be coming true
 * Bushnell also felt that Atari should move forward – VCS should be abandoned
 * Atari should make next-generation console before Jackals catch up to or surpass Atari
 * Called this philosophy “Eat your own babies”
 * Warner had other plans – hired consultant to help with Atari problem
 * Ray Kassar – former VP of Burlington Industries – US largest textile manufacturer
 * Harvard graduated, at 25 youngest VP of Burlington – felt this experience would transfer to any manufacturing facility
 * Kassar's first task from Warner – evaluate if Atari was worth keeping
 * Played VCS – felt it could make money – Atari could be profitable with some changes
 * Kassar and Bushnell did not get along
 * Kassar came to work early – 7:30AM – disapproved of Bushnell's “work smart, not hard”
 * Did not approve of Atari's rampant drug use – felt Bushnell's attitude encouraged it
 * Also Disagreed with Bushnell on future of VCS – wanted to make it star of Atari's 1978 Holiday Line-up
 * Showdown between Bushnell/Warner came at November 1978 budget meeting in NYC
 * Bushnell made some unpopular recommendations
 * First, Atari's pinball division – re-founded when video-arcade games began to suffer
 * Made extra-wide games – Gerard felt they should make standard games
 * Bushnell said that they would make no money doing the same thing as everyone else
 * Pinball line should be closed down entirely
 * Also, spoke of VCS – should sell off remaining inventory, move on
 * Warner already committed to VCS for Holiday Season – too late to make changes
 * Bushnell said that Warner would see a repeat of last year – basically, failure
 * Meeting exploded into shouting match – accusations flew
 * Bushnell said that Gerard and Warner knew nothing about electronics industry
 * Gerard said Bushnell no longer cared about company and that his ideas were erratic
 * Both Warner and Atari employees were surprised with Bushnell's suggestions
 * Next day, Gerard had private meeting with Ross
 * Ross asked Gerard's opinion on VCS – Gerard said it would sell well
 * Ross decided to wait it out and see outcome
 * Gerard flew back to California – heard of Atari meeting held by Bushnell without Warner representation
 * Last straw – called attorney to write up dismissal papers for Bushnell
 * Bushnell was forced to retire
 * Received parting fee as well as future bonuses based on Atari's performance
 * Also signed a non-compete agreement – not work for videogame company until 1983
 * Ray Kassar took over as Atari CEO – worried Atari employees
 * At this time, Arcades had been stagnant for years
 * In 1978, new game from Taito had potential to revitalize industry
 * Space Invaders
 * Originally a test for evaluating computer programmers - Taito converted it to a game
 * Released in Japan – performed slowly in first 3 months – after that became a phenomenon
 * After a year, more than 100,000 units in Japan
 * Coin-shortage due to Space Invaders – Japan had to triple production of its 100 Yen piece
 * Even with Japanese success, Taito worried about American release
 * Most popular games on 1978 based on popular themes – driving, sports, war
 * Space Invaders had no recognizable objects for player to control – had gun turret/aliens
 * Keith Egging – Taito of America VP of Product Development
 * Played Space Invaders, felt it would be big in US, too
 * Set up a single Space Invaders game at a secret location in Colorado
 * Players loved it – convinced it would be huge hit
 * Taito sold game to Midway for distribution – Spring 1978, Space Invaders hit US
 * American players made game almost instant success
 * Midway couldn't keep up with orders
 * Sold for $1700 – owners gladly paid price - game could pay for itself in just over a month
 * At good location, Space Invaders could bring in $300-$400 a week
 * Within a year, Midway had sold over 60,000 Space Invaders games in the US
 * Arcade games were profitable once again
 * Another game helped industry – Atari Football
 * Hardware engineer David Stubben and Software Engineer Mike Albaugh created it
 * Stubben had seen an unfinished football game called X's and O's
 * X's and O's made by Bristow around the time he made Tank
 * Stubben took idea and improved it – added smooth-scrolling playing field and trackball
 * Not actually 1st trackball game – Taito soccer game had trackball 1st
 * Stubben says Atari brought in Taito game and copied its controller
 * Football processor more powerful than Pong – still not enough power for figures
 * Still needed to use X's and O's to represent players
 * Atari football had 3-minute timer
 * After 3 minutes, players had to put in more quarters to keep playing
 * When first released, Football made as much money as Space Invaders
 * After real football season ended in January, game lost most of its business
 * These games made arcades popular again – still tough to be seen as “good”
 * Ronnie Lamb – Long Island woman started a campaign against videogames
 * Got on Donahue – many towns banned arcades – videogame image severely damaged
 * Many mall-owners, etc. did not want to open new arcades even in non-banned towns
 * Back while still at Atari, Bushnell toyed with bringing videogames to wider audience
 * Wanted videogames to appeal to entire family
 * Needed to come up with place where parents would almost be forced to let their kids play
 * Thought of pizza restaurant with combined arcade
 * Restaurants would use robotic music-playing animals to attract kids – like Disneyland
 * Even if pizza was bad, Bushnell felt kids would choose the restaurant due to robots
 * Decided to give kids free tokens to play games while they waited for pizza
 * Free tokens would last about 5 minutes – had to pay for more
 * Restaurants would have videogames and other arcade-games like skeeball
 * Games would give kids tickets for prizes – Bushnell knew that prizes appeal to kids
 * Bushnell called the new business Pizza Time Theaters
 * Restaurants named Chuck E. Cheese after robotic rat mascot
 * Bushnell had idea long before he left Atari – as early as 1974
 * In 1977 bought abandoned brokerage office in San Jose strip-mall
 * Converted to 1st Chuck E. Cheese restaurant – much smaller than later restaurants
 * Had everything he imagined – pizza, arcades, musical-stages
 * Warner also got rights to Chuck E. Cheese when they bought Atari
 * Neither Ross nor Gerard were ever interested – tried to get Bushnell to sell it – never did
 * When Bushnell was forced to retire he asked to buy rights to Chuck E. Cheese
 * Ross sold him the entire enterprise (robots and all) for $500,000
 * Bushnell paid it off over 5 years
 * If arcade videogames continue to struggle, Chuck E. Cheese may have died
 * Space Invaders/others gave any videogame-related business a surge
 * People knew they could find Space Invaders and other games at Chuck E. Cheese
 * Shortly after leaving, planned second Chuck E. Cheese
 * Took over old Toys R Us - 2nd Chuck E. Cheese was largest Californian arcade at time
 * Had 2 floors of games – large spiral ramp around 20ft-tall statue of Chuck E. Cheese
 * Location a success – by the end 1979 Bushnell selling Pizza Time Theater franchises
 * $1.5 million to construct each in full – properly ran, could pay for itself in 6 months
 * Future videogames would help Chuck E. Cheese become a billion-dollar company

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