Early video game industry (1971-1976)
Video game crash of 1977
The first major crash in 1977 occurred when companies were forced to sell their older obsolete systems flooding the market.
In 1977, manufacturers of older, obsolete consoles and Pong clones sold their systems at a loss to clear stock, creating a glut in the market. Atari and Magnavox remained in the home console market, despite suffering losses in 1977 and 1978. Many manufacturers were negatively affected by the market collapse, with Allied Leisure going bankrupt, Fairchild Semiconductor and National Semiconductor leaving console development, and Magnavox cancelling their next console. Coleco remained after making a $30 million loss in 1977, while Atari remained with the help of funding from Warner Communications.
In North America this drove most smaller game companies out of business, but in Europe it had a different impact. The reduction in demand for the chips that powered first-generation consoles caused the price of those chips to drop dramatically. European manufacturers such as Hanimex, Secam, and Soundic released cartridge-based game consoles that contained no CPU. Cartridges for these consoles would contain the same chips that power later Pong consoles.
The crash was largely caused by the significant number of Pong clones that flooded the market. The crash eventually came to an end with the success of Taito's Space Invaders, released in 1978, sparking a renaissance for the video game industry and paving the way for the golden age of arcade video games. Soon after, Space Invaders was licensed for the Atari VCS (later known as Atari 2600), becoming its first big hit and quadrupling the console's sales. This helped Atari recover from their earlier losses. The success of the Atari 2600 in turn revived the home video game market, up until the North American video game crash of 1983.
Golden age of arcade video games (1978-1983)
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- Jason Whittaker (2004). The cyberspace handbook. Routledge. pp. 122–3. ISBN 0-415-16835-X.
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