Similarities Between the Atari Shock and Cryptos

Most of the emerging technologies have gone through a rough adoption phase. For instance, the internet had its fair share of disaster during the dot-com bubble. During its baby steps, the video game industry was considered to be a niche product, tailored towards the narrow geek demographic. For the longest period, it was deemed to be borderline shameful, to have an affection for video games.

Gaming also took quite a beatdown from media, which for more than a decade did not fail to mention “violent video games”, each and every time a violent event occurred.

However, do you know what the fastest selling product in the world by a landslide is currently? And we do mean ALL of the products: consumer electronics, movies, music albums, anything and everything.

It happens to be a video game Grand Theft Auto 5, which shipped a whopping 12 million copies of the game, during the first day of sales.

Nowadays, video games are a multibillion-dollar industry, whether you like it or not. We have already witnessed multiple cultural phenomena and commercial successes in the form of Call of Duties, Minecraft, and Fortnite. The industry used to be David, but now it is a giant Goliath.

But quite a few people know, that there was a year, there was a company, and there was a game, which single-handedly nearly buried the young new industry into the ground.

For now, we will have to go to the year 1982, when the new industry flourished - the era of Pacman and Space Invaders. That year a combined revenue of North America arcade and home games had reached almost 12 billion USD, and we haven’t adjusted that for inflation. The revenue was so colossal that it actually dwarfed the combined revenues of US music and movie industries. The combined console industry was valued at more than 3 billion USD.

Then, in a mere two years, the total value of the console gaming industry went from almost 3 billion to just 100 million USD. That's a staggering 97% drop! The market reacted, pulling nearly all of the gaming consoles from the shopping shelves and public opinion drastically changed as well.

This event will go down in the history books as “The video game crash of 1983”, or as it is eloquently called in Japan - “the Atari shock”. We will try to draw some parallels between the current crypto situation and the events that led to the clinical death of an industry.

First up we would want to understand why exactly the crash happened. One of the first reasons was the market saturation. The current game console market is divided between three tech giants: Microsoft with its Xbox series, Sony with PlayStation and Nintendo with their ever-changing line of home consoles, currently presented in the form of Switch. Together, they have a total hegemony over the global console market.

But back in the day, the situation was far different from what we have now. The yet unformed market was a battleground, where nearly thousands of different competitors fought for their share of the pie. In this battle, Atari was an enclave, which controlled almost eighty percent of the video-game market.

Unsurprisingly, Atari had a leading role in the history of the crash.

It started up just like a typical silicon valley Startup , with the founder of the company, Nolan Bushnell, starting a new company with only 500 USD in 1972. Nolan was pursuing his lifelong passion - developing games. A mere four years later, while seeking for outside investors, Nolan sold Atari to Warner Brothers Communications for alleged 28-32 million USD in 1976.

It is documented, that the working conditions in Atari were far from paradise. Game programmers were severely underpaid, and they were prohibited from putting their names in the titles of the games they’d made. It led to a group of core programmers leaving Atari to found their own company called “Activision”, the company that is now commonly known as Activision-Blizzard - one of the largest video game companies in the world, that can boast a capitalisation of more than 17 billion USD.

But that was far from the main reason for the crash. We have horrible working conditions today for instance, yet it does not influence the whole of industry. The main reason for the crash was simple: Atari opened the floodgate for rival consoles and video games with rushed and hurried production cycles.

The final nail in the coffin was the most infamous Atari video game “E.T”, loosely based on the Steven Spielberg movie of the same exact name. The game was such a disaster, that for almost 30 years an urban legend existed, that there is a burial site in the American desert, where a tonne of ET cartridges is buried.

What was so bad about the game that it nearly cost us the demise of a whole industry? One of the most glaring reasons was the fact that the game was made in just five weeks after Atari spent $20 to $25 million on the property rights and then skipped quality testing to hit the lucrative Christmas deadline.

The most fascinating thing about this was that, in its actuality; burial of the unsold cartridges in the Mexican desert wasn’t an urban legend at all! It turns out that in 1983 Atari dumped fourteen trucks’ worth of unsold merchandise in a New Mexico landfill and poured cement over it.

During that period, as the console industry in the US was withering, the Nintendo Famicom launched in Japan and was a huge success. It took two years for the company’s console to arrive in America, disguised as the Nintendo Entertainment System.

Nintendo carefully avoided using the words "game" or "console" in their marketing, because retailers were initially wary of selling video games (after the bruising losses of previous years).

The other important thing that Nintendo did was put a short leash on all of the third-party developers and carefully vetted each and every project that they allowed to be published on their platform - and over and above this they even marketed the game boxes with an “Official Nintendo” seal of quality.

Nintendo also equipped a protection system - placed within the cartridge. A unique hardware chip was installed for copy protection, and Nintendo conducted “lot check” to prevent selling game titles which were against the Nintendo's guidelines.

Fun fact: for example, Nintendo officially never sold on the territory of Russia, but it was littered with various Chinese copycats of Nintendo Famicom. With the help of copyright protection systems, some games copied by the Chinese manufacturers were deliberately corrupted. The game “recognised” the fact, that it was being forfeited, which resulted in some fun results.

The corrupted version of the famous Teenage Mutant Ninja Turtles NES beat-em-up game had only three lives for the entirety of it, while the original version had infinite lives. And the Chinese cartridge with a Ninja Gaiden game had completely no power-ups.

So what exactly did bring an emerging technology to the brink of extinction?

The answer is shockingly simple - the lack of quality. You can say with a certain degree of confidence, that Nintendo single-handedly revived the home console market, simply because it served as a central authority for the game developers, and each and every project that appeared on Nintendo consoles was subjected to a strict quality control procedure.

This is where all of the parallels with the cryptoverse start. The industry is in desperate need of the "Nintendo" - a central authority, exercising centralised quality control, which is quite hard to achieve due to the permissionless and decentralised nature of the industry. But as history shows time and time again, a vast influx of low-quality projects is a BIG red flag.

If the industry accumulates too many junk projects, too many “E.T.”s, they can discount the reputation of the entire Blockchain ecosystem. Besides, the average investor still does not have the necessary tools for any proper due-diligence and evaluation.

Drawing further parallels, BTC can be associated with Atari. During their finest days, they represented the whole industry but then started to fade away slowly.

It does not mean, that Atari is dead, the company exists to this day, almost after 30 years after the crash they’ve caused. It’s just much smaller.

But Atari didn’t go unnoticed, and it’s misadventure paved the way for a lot of new generations. Who knows where would we be video game-wise if the Atari shock didn’t happen.

Meanwhile, the team at Genesis Vision is creating a decentralised asset management platform, uniting all of the market participants into a single ecosystem. While the platform we are building is decentralised, transparent and protected, we want to give our investors all of the necessary tools for the due-diligence and proper evaluation to play the role of Nintendo by themselves, making sure that the quality of their investment is up to par.

The platform releases October 30th, so if you want to read up more on the project, make sure to visit our website.

Disclaimer: The content of this article is sponsored and does not represent the opinions of Finance Magnates.