Lecture+8+Notes

= __Lecture 8 Notes__ = ===For the Fall 2010 Discussion Board, Click [|HERE] ===

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 * 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 interest
 * 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, very new 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 million
 * 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

=__Links__=

**__ Early Cartridge-Based Game Consoles __**
Atari VCS (AKA Atari 2600)

Advertisements for the Atari VCS (AKA Atari 2600)

Info, Images, and Video of Early Consoles, including the Fairchild Channel F, RCA Studio II, and Atari VCS/2600

**__ Successful/Notable Arcade Games __**
Sega Periscope (First Arcade-Game to use Periscope-Style Viewer, also 1st to use 25 cents instead of a dime)

Midway SeaWolf (1st Video-Game to use Periscope-Viewer)

Indy 800 (The arcade game, by Kee Games, that inspired Steve Ross to buy Atari)

Taito Space Invaders

Play a Version of Space Invaders Online

Atari Football

Chuck E. Cheese's Home Page (still going strong, years after Bushnell)