The Ultimate History of Video Games: From Pong to Pokémon and Beyond—The Story Behind the Craze That Touched Our Lives and Changed the World

by Steven Kent

  In 1985, Zito’s fascination with movies and video games merged into the idea of creating interactive games using video footage instead of animated characters. He believed that controlling real people instead of cartoons would give games impact.

  Zito asked Bushnell for permission to explore “interactive television.” Bushnell liked the idea and told him to assemble a small team. Zito’s team included Steven Russell, the man who made Spacewars while studying at MIT; Rob Fulop, the Atari programmer who designed the VCS versions of Missile Command and Night Driver; David Crane, the charter member of Activision who created Pitfall; and other industry pioneers.

  As they explored ways of interlacing video images and computer graphics, the team discovered that the ColecoVision’s graphics chip had been designed to allow it to place video game images over a clear background. They learned later that Coleco engineer Eric Bromley had hoped to do games with video images in the background, but the company abandoned the idea because of costs.

  Zito and his team hoped to take advantage of Bromley’s design. They wanted to stream video images transmitted through a cable signal into a ColecoVision, then add interactive images. The team was able to build a prototype for testing its ideas with a limited budget but needed more money to take the idea any further.

  We basically finished the design of the ColecoVision machine and added syncable video. When I put together a budget, it looked like it would cost about seven million dollars to get a machine, along with a couple pieces of software, ready so that we could introduce this thing. Initially, it was a game machine, but the vision all along was that it would basically be a cable box, and you’d be able to get video games or any kind of interactive programming over cable.

  Nolan said to me, “Well, if you want to do this, you’re going to need to raise the seven million bucks, ’cause we don’t have it.”

  —Tom Zito

  If Zito was going to complete his project, he needed to take on a partner who could fund it. That partner turned out to be a toy company—Hasbro. Hasbro agreed to spend the $7 million to fund the project in exchange for the video game rights to the technology. Zito named the venture Nemo.

  Within six months, however, the partnership was strained. Hasbro wanted the Nemo project to move at a faster pace, but delays in engineering prevented it. After some discussion, Hasbro told Zito that he could either continue the project on his own or Hasbro would take it over, but the company would no longer finance Nemo while under the Axlon umbrella. Forced to choose between Bushnell and Nemo, Zito went with his project, costing him an important friendship.

  Upon leaving Axlon, Zito formed a company of his own called Isix. Because of the amount of space required to store digitized video footage, Isix’s games could not be stored on computer diskettes or in a game cartridge. Isix’s engineers developed two solutions for the problem—broadcasting the footage as a cable signal or storing it on video cassettes. Either way, the video footage had to be looped from an outside source and through a console that added the interactive programming before it could be played.

  By the middle of 1986, Zito’s team had produced three short trial games. They made a four-minute interactive mystery called Scene of the Crime, a baseball game called Bottom of the Ninth Inning, and an interactive music video using the song “You Might Think I’m Crazy” by the Cars.

  Zito’s next step was to make an interactive movie. He hired a director and had members of his team write the script. His original plan was to do an interactive movie based on the Nightmare on Elm Street movies—a series of popular horror films featuring a maniac named Freddie who shredded people to death in their dreams. Negotiations with the studio fell apart, however, so Zito decided to create a script with original characters. He hired Terry McDonell, a future editor of Esquire and Men’s Journal, to write the script.

  The final version, titled Night Trap, was about fledgling vampires attacking a group of teenage girls during a slumber party. As apprentice vampires, the villains did not have fangs; in fact, they wore black stockings over their heads. They simply sneaked around the girls’ house, trying to trap them, then sucking their blood with a device that used a power drill. The game was more silly than violent.

  Night Trap was not a typical video game. The point of playing was to protect the girls by catching the vampires with booby traps. One of the girls was the late Dana Plato, the actress who played the older sister on the NBC sitcom Different Strokes.

  Players would scan the rooms of the house, looking for vampires and trying to spring traps at the right moment to catch them. If players’ timing was right, the game would show a video clip of a vampire being trapped. If they missed, the game would show a clip of the vampire leaving the room and possibly even catching a victim.

  In 1987, Zito made a second full-sized game called Sewer Shark. In this game, players guided a futuristic fighter craft through tunnels. The game showed clips of the fighter streaking toward junctions, at which point players had to direct it toward openings. If they guided it in the right direction, the game showed a video clip of the fighter going through the opening. If the player made the wrong choice, the game showed video clips of spectacular collisions. Zito hired a special-effects wizard who had worked on the movie 2001 to help produce the game.

  Hasbro stopped funding the Nemo project shortly after the filming of Sewer Shark. Zito toyed with the idea of marketing the games as arcade laser-disc games, but the laser disc fad had ended. With no funding and nowhere to sell his ideas, Zito packed Night Trap and Sewer Shark in a warehouse. Several years passed before video game technology caught up with Tom Zito’s dream.

  In the meantime, a new force was emerging in the electronic entertainment industry.

  Prior to working on Nemo, I went back to New York for Christmas [in 1985], and I needed film so I went to a camera shop. All these boys were crammed around this counter, playing with a new toy. I went to see what they were playing, and they had this new video game system by Nintendo. It looked better than anything out before it, and I thought, this could be big.

  —Tom Zito

  * Warner retained Atari Games (the coin-op division), which later sold technological assets to Mitsubishi and BSR.

  We Tried to Keep from Laughing

  All the headlines said, “Video games are dead,” and here was this little upstart company that no one had ever heard of called Nintendo that said they were going to bring video games back again. Everybody seemed to think that it was a joke. “Oh yeah, they say they can bring video games back again.”

  —Herb Weisbaum, consumer affairs correspondent, CBS News

  Here it is 1985, Christmas of 1985, and Nintendo has just introduced the NES in the New York market, as well as in FAO Schwartz stores nationally. It’s a home run … a hit! It’s a sell-out.

  So I’m saying, “Who’s gonna be interested in this?” And I said, “Well, I’ll bet the toy companies are gonna be very interested in something like this because … Nintendo is gonna clean your clock next year. I mean, Nintendo is going to launch nationally and they’re gonna be represented by Worlds of Wonder.

  —Tom Zito, founder, Digital Pictures

  The Rising Sun

  The American video game market may have crashed in 1983, but the international market continued almost unimpeded. Atari marched on in Europe and Japan. Even the Canadian market remained fairly active throughout most of 1984. Atari, Mattel, even Vectrex sales continued in foreign markets.

  Nintendo, the arcade giant that created the games Donkey Kong and Popeye, introduced a new game console to the Japanese market in May 1983.* Christened the Famicom (for Family Computer), the new console was a testament to innovation and economic engineering.

  Nintendo built the Famicom around the 6502 processing chip, a close cousin of the 6507 that Atari used in the original Video Computer System (VCS). Technology had evolved, however, and Nintendo’s engineers were able to reap more power from the chip. Along with added memory, the Famicom had a number of com
ponents (including a second processor for generating graphics) that had been either unavailable or too expensive in 1976, when Miner and Alcorn designed the VCS. This upgraded architecture allowed the Famicom to produce more colors and more detailed graphics than the VCS or any system before it.

  It was amazing because it was basically a re-warmed VCS, even going so far as having the same processor in the box as the VCS. [The Famicom had] a better graphics display chip, but the basic processor was the same. And the reason that they could have a better look was that addition of slightly more RAM in the thing so you could address more pixels; that’s all.

  —Tom Zito

  Of the Famicom’s many innovations, the most important was its controller. The VCS was initially designed to play sophisticated versions of Pong and Tank and came with both paddles and joysticks, but most of its games used a joystick. That turned out to be a weakness. VCS joysticks were versatile for their time but were uncomfortable to hold. To use them, most players had to grip the square base with one hand and move the stick with the other. People often complained that their hands cramped or their fingers locked around the base after long stretches of game playing. Also, the stick, not designed to withstand the kind of stress players often placed on it, often broke.

  Mattel had added a measure of ergonomics, durability, and sophistication to game controllers with its Intellivision game pad, which featured a flat disk that players pressed with their thumbs. Though it took players a while to get used to the disk, most felt that the Intellivision controller added precision to gaming.

  For the Famicom, Nintendo designed a new kind of controller that was derived from the +-shaped direction pad that its lead engineer, Gumpei Yokoi, developed in the late 1970s for the Game & Watch LCD games. Somewhat similar in concept to the disk on the Intellivision controller, the Famicom controller allowed players to maneuver characters by pressing on the + pad with their left thumb.

  The design of the Famicom’s controller was both elegant and functional. The joystick, once the symbol of video gaming, was about to be replaced by a newer and more universally applicable device. Most people found the Famicom controller easier to use and more comfortable to hold.*

  The Famicom controller was easier to use than the Intellivision controller. Nintendo’s + pad was more intuitive than Mattel’s disk. Intellivision’s controller also included a twelve-button membrane keypad that was cumbersome to use. The Famicom controller had a simple two-button design.

  The Japanese launch of the Famicom was not without problems. A bad chip set in the original design caused the system to crash during certain gaming conditions. Hiroshi Yamauchi, president of Nintendo, decided to recall the entire first shipment of Famicoms and replace the chips. Though it cost Nintendo a small fortune and alerted retailers to problems with the new console, Yamauchi decided that protecting the Nintendo name was more important than preserving the initial momentum of his sales.

  After that initial setback, the Famicom became a spectacular success. Nintendo sold more than 500,000 Famicoms within two months of introduc ing the system into stores. Encouraged by his success with Japanese consumers, Yamauchi set his sights on exporting his game console to the United States. The only problem was that no one in America seemed particularly interested in video games any longer. As far as retailers and software makers were concerned, the U.S. video game industry was dead.

  It seemed like all the print media wanted to keep writing about was the death of video games. I mean, they just loved to write that story. “Video game sales are dead, video games are gone, video games are history.”

  Then I’d go to CES [the Consumer Electronics Show] and see all this stuff, and think, “Where are these people coming from? It isn’t dead.” It was very interesting.

  —Herb Weisbaum

  Retailers took a tremendous financial beating because of the way the Atari business had fallen apart. I mean, with the demise of the old 2600 business, you wouldn’t even try bringing up the words video game with some of these buyers. It was like they were going to pull you out to the parking lot and shoot you if you said the words video game.

  —Jim Whims, former vice president, Worlds of Wonder

  Left at the Altar

  Mr. Yamauchi said, “Why don’t you contact the Atari people?”

  So I called Ray [Kassar], and the next thing we knew, we were going down in a corporate jet to Warner.

  —Howard Lincoln, chairman, Nintendo of America

  One lesson Hiroshi Yamauchi learned from his attempts to break into the U.S. arcade market was that popularity in Japan did not automatically translate into success in America. Ron Judy and Al Stone, the men who represented Nintendo’s products to arcade distributors, struggled to get people to take their products seriously. Even Radarscope, one of the top arcade games in Japan, had gone unnoticed in the United States. Had it not been for the runaway success of Donkey Kong, Nintendo might have never carved a niche in the U.S. market.

  Yamauchi had heard the stories that the U.S. video game industry was collapsing. Atari had already announced its low earnings by this time, and Warner Communications stock had already dropped. The worst was yet to come, but Yamauchi certainly knew that the 1982 Christmas season had not lived up to expectations. Even so, he believed that the Famicom was different, that it was the best video game console ever made. What he needed, however, was a powerful network to market the system on a worldwide basis. Even with its strong presence in the arcade business, the name Nintendo meant very little to retailers outside of Japan.

  With no presence in the retail channel and no way of making inroads, Yamauchi decided that Nintendo needed a partner to represent the Famicom in America. He decided that the best partner would be Atari. At Yamauchi’s suggestion, Nintendo of America vice president Howard Lincoln contacted Atari early in 1983.

  Ray Kassar was still running the company when Lincoln called, but his tenure was coming to an end. The call came four months after Kassar’s announcement about not reaching sales goals, and Warner stock was still in decline, due to investor doubts about Atari’s future. Investors also had doubts about Kassar himself. The allegations of insider trading were public by this time, and Kassar, Atari’s once lofty CEO, was fighting for his corporate existence.

  Lincoln called Kassar to suggest a partnership. He had been authorized to offer Atari a license to sell the Famicom internationally in every market except Japan. Lincoln’s offer was fairly straightforward. In exchange for allowing Atari to sell the system under its own label, Nintendo would receive royalties on every unit sold and have unlimited access to sell software for the system.

  The offer placed Atari in a no-lose situation. Licensing the Famicom did not necessarily equate to making a good faith effort to market it. What Lincoln and Yamauchi did not know was that General Computer, the Massachusetts game developer that had produced most of the games for the 5200, had begun work on a new game system for Atari—the 7800.

  If the new system proved to be more powerful than the Famicom, the license would have enabled Atari to smother the Famicom globally. If, on the other hand, the 7800 did not sell well, a partnership with Nintendo could provide Atari with an escape hatch. Kassar asked for a meeting.

  Lincoln and Minoru Arakawa, president of Nintendo of America, flew from Seattle to Atari headquarters in Sunnyvale, California, to explain the details of the partnership.

  A meeting was set up, and Kassar told Arakawa he would send the Warner Communications corporate jet, a Gulf Stream, to collect him and Howard Lincoln. En route to the airport, Arakawa asked Lincoln if he expected lunch to be served on the plane. Lincoln said there would probably be no food on the short hop between Seattle and Sunnyvale. Arakawa was starved, so the two headed to a restaurant before meeting the jet at a private airport.

  The jet, fitted with leather couches and gold-plated ashtrays, was empty except for Arakawa, Lincoln, and the crew. Once it was airborne, the pretty attendant set up dining tables with linen tablecloths and asked if the
two were ready for lunch. Arakawa threw Lincoln a dirty look when she served paté, fresh poached salmon, and Dom Perignon.1

  Lincoln and Arakawa received royal treatment during their visit at Atari. Not only did they meet with Manny Gerard and Ray Kassar, but Steve Ross, president of Warner Communications, stepped into the meeting to shake their hands. When they finally sat down to discuss the partnership, several of Atari’s top executives crammed into the conference room to listen. As far as Lincoln and Arakawa could tell, things were going better than expected.

  We got down there and, god, what a cast of thousands: Ray Kassar, Manny Gerard, Steve Ross, Skip Paul…. And we were just getting hammered with one question after another.

  —Howard Lincoln

  Everybody said, “Oh, that’s a good idea. We’ll buy it.”

  The negotiations started, but the price … they didn’t buy it. After we started negotiations, we created games to show them … Defender, Centipede, those [kinds of] games.

  —Minoru Arakawa

  The next step in the negotiation process was for Nintendo to demonstrate the Famicom. Yamauchi sent several Famicom consoles to Atari’s research and development labs and invited members of Atari’s executive staff to watch a demonstration of the system at his corporate headquarters in Kyoto, Japan. Kassar did not attend that showing but sent a delegation led by Skip Paul, Atari’s legal counsel.

  After the initial demonstration of the Famicom console, negotiations evolved into a three-day struggle over prices and royalties. Paul claimed that Kassar and Gerrard were interested in making a deal but wanted to make some changes in the contract. Lincoln had to make sure that Nintendo’s best interests were not compromised. Both Kassar and Yamauchi, the only men with the authority to approve a final deal, appeared anxious to iron out the details.