What caused the video game bust?

Jeff Tucker has a fun nerd problem posted on the Mises blog: a question from a reader about the video game bust of 1983. Anyone got an answer? (I'm looking specifically at Brandon Berg.)

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Agnostic already answered that

Home video consoles did not kill the arcade.

That was a few years before I was born, so I can't give a first-hand account.

Whoops

Doh, wrong year.

Nerding 101

Damn nerds! Ruining this effing world!!! :)

I can't give an explanation for the bust, but I can give one for its resurgence in three words: Computers and Nintendo.

This effing world?

I, for one, find the mysteries of this world to be ineffable.

Wha?!

Eff that!

Don't blame me. I was just a

Don't blame me. I was just a little kid.

atari kept getting worse

I remember I specifically stopped buying atari 2600 cartridges because I thought the quality of the games started to get retarded. I totally loved combat, asteroids, space invaders. Over time the quality got more and more crappy. The last game I bought I think was ET and I just couldn't figure out what the game was supposed to be about.

It was a classic speculative

It was a classic speculative bubble.

When video games were new the variety of games was low because the games were very simple. This led to many copies of games. Because of the simplicity of the games, the copies had almost as much value as the originals. Playing "squash" on the magnavox odyssey was an experience of roughly equivalent value to playing pong on an atari system. More and more games came out and people kept on buying them. Partly because they were fun, partly because they were new and people didn't know whether they were fun or not until they bought them and played them, and partly because it was possible to buy a console and own EVERY game for it, regardless of quality, at fairly reasonable cost and the very enthusiastic gamer market did just that sort of thing.

This crazy market led a lot of speculative investment in making games. The market became flooded with games. The previously unchecked rampant enthusiasm of gamers hit a breakpoint. Video games had started to become mature, the best video games were starting to get pretty good with games like donkey kong, pac-man, pole position, etc. This made the contrast to low quality games that much more apparent.

The quantity of low-quality games exploded at the same time that consumers became less willing to buy low-quality games. The sheer quantity of games forced consumers to be discriminating about the games they buy, because it was no longer possible to simply buy everything. The number of games released per year for the atari 2600, for example, was less than 20 from 1977 through 1981, in 1982 over 100 games were released for the 2600, in 1983, nearly 200. A market that didn't have to be discriminating in order to get good value for their money was suddenly forced to be extremely discriminating.

Simultaneously, the market was reaching saturation. Grand Theft Auto IV, an extremely popular "blockbuster" modern video game has sold 13 million copies worldwide in about a year. They manufactured 4 million cartridges for ET the game in 1983. Eager speculators funded publishing millions upon millions of cartridges of lackluster games, the market said "no thanks, we've looked at the games we have, and we don't want your crap". Turns out, it cost a lot of money to manufacture all that crap and a lot of companies hadn't considered the possibility of such a colossal failure of sales. They became overextended, and they went out of business.

Only a few years later other companies, especially Nintendo, came into the same market with high-quality products and the market responded very favorably. I don't think any explanation other than "overproduction/poor quality combined with market saturation" is needed.

You should post this...

...as a separate post. I'll frontpage it.