North American Video Game Crash
The Video Game Crash of 1983 is also called Atari Shock in Japan. It is the name given to the biggest recession in the video game market in history between 1983 and 1985. During this time revenues dramatically fell from around US 3.2 billion to around US 100 million, which was a total loss in business of almost 97%.
What led to the recession in the video game market was a complex mix of events. Before the crash the video game industry had mainly two sources of income. One was the video game consoles sold to private homes and the other was arcade games in public areas. The first channel of income, private video game consoles, faced greater competition due to many newly founded start-up companies. These new companies mainly offered cheaper and lower quality products, which also decreased the reputation of the entire industry. Video game consoles were no longer seen as high-tech entertainment, but as low budget entertainment. This trend was supported by the rise of the home computer. By 1982 home computers could provide better sound and graphics than their competitors, the video game consoles. The home computer manufacturers sensed this new opportunity in the market and offered cheap prices to consumers. Why should anyone buy a video game console if you could get a better product for the same or even cheaper price?
One of the most successful models during this time was the Commodore 64. Its makers profited highly from the crash of video game consoles. There were also other models which became popular at this time like the Atari 400 for instance.
Besides the price, sound and graphic qualities, the overall usability was better with home computers than with video game consoles. This gave rise to the possibility that besides video games, office work could also be done. I personally knew many friends who bought their home computer for office purposes, but in the end they were mainly used to play video games. By using a home computer as an office computer, they could even become tax deductible, something that was not possible with a video games console.
Home computers offered further advantages too. The video games which could be used by home computers were easy to copy. This was another reason why consumers started to buy home computers instead of video games consoles. Instead of paying for each new game, it was possible to copy them from friends. Even though copyright laws existed they were not very strictly enforced. They were also difficult to enforce as, by nature, most home computers were stored at private homes which meant copied games were difficult to trace. Also, games for home computers were saved on floppy disks which offered another important advantage. It made it possible to save games in progress, a new feature which gave rise to more complex games.