I love reading about the history of video games, and having been a gamer (albeit a young one) during the era of the great video game crash, I find it fascinating that much of the blame gets placed on Atari and their failures with E.T and Pac-Man. There is so much more to it.
For me, the biggest culprit was the sheer number of gaming systems on the market at one time. There were at one point ten or more gaming systems on the market, not counting variations like the Sears versions of Atari systems. TI-99, Fairchild Chanel F, Atari 2600, Atari 5200, Bally Astrocade, Magnavox Odyssey 2, Intellivision, Emerson Arcadia, ColecoVision and Vectrex all vying for consumer dollars.
It also didn't help matters that the comparative cost to today's dollar value put these systems at between $400 and $800 each. The games also retailed for upwards of $50 each and were all varying degrees of crap. Sure, good ideas and the beginnings of gaming started here and some titles stood the test of time. But most were derivative garbage, cheap knock-offs of another more successful title or quick cash-ins tied to unrelated franchises. It was easy to snooker consumers into buying a Star Wars or Spider-Man game that had a cool looking box art, only for them to find the game iside was complete garbage.
Aside from word-of-mouth from people who already bought the games, people had no way of knowing if the game they were eying was going to be fun or complete garbage. Retailers had to decide what systems to carry and which not to. As each console went down in flames, consumer, corporate and retailer faith in the viability of video games continued to dwindle. I remember going to stores that carried the games. Stores like K-Mart, KB Toy & Hobby, Woolworth's, Montgomery Ward and Kiddie City (east coast) having these huge bins full of these games for dirt-cheap prices. They couldn't sell the stuff. The game manufacturers stopped accepting returns on the unsold merchandise and retailers had no choice but to drop the price of these games to $1.99 or so. You don't need to be a professor in economics to know that retailers were taking an enormous loss on these games.
And it was at this very time when gaming was coming apart at the seams that Atari released their two biggest flops in E.T the Extra Terrestrial and a heinous port of Pac-Man.
Since the 2nd generation of gaming and that big crash of '83, Nintendo pretty much single-handedly resurrected the US video game market. Sega was the 2nd player to try their hand and Atari continued to hemmorage money with the 7200. The 7200 and Master System were both pretty much flops, but Nintendo with their in-house marque titles and great, new games from Capcom, Konami, Taito and a handful of others revived the market.
In fact, since the 2nd generation of video game consoles ended, there has never been more than a handful of home consoles on the market at one time. There have been a few companies try their hand over the years with little or no success. Neo Geo, 3DO, TurboGrafx, CD-I and a few others threw their hats into the ring up into the mid 90's, but quickly exited the market that Nintendo and Sega-reinvigorated with Sonic and the Geneis/Mega Drive dominated.
It wasn't until the mid-90's when Nintendo screwed Sony over and backed out of their deal to make a SNES/Super Famicom CD-ROM add-on that a 3rd viable competitor entered the gaming arena. But that's a story for another day...
