Much like any other industry, video gaming has seen its fair share of commercial failures. There’s no shortage of games that fail to turn a profit, and there are even a few that do so badly that their developer goes bust. There’s only one game that underperformed so badly that it nearly led to the end of the entire video game industry, however: E.T. the Extra-Terrestrial.
Released in 1982 for the Atari 2600, this adaptation of the Spielberg film of the same name has achieved infamy and notoriety for the supposed burial of several million unsold cartridges in a New Mexico landfill. While the veracity of this remains doubtful, the myriad failures of E.T. are absolutely certain.
So here’s what happened. In case you haven’t heard, E.T. was a pretty big film. $792 million big. Naturally enough, Atari wanted in on the action, and so entered negotiations for a licence to adapt the film into a videogame. This is where the problems started. Atari were so confident in the E.T. brand that they reportedly paid $20-25 million for the licence, which was huge by 1982’s standards. To make things worse, negotiations took so long that Atari only secured the licence in late July, and knew they wanted to release the game by Christmas. Given manufacturing times, that left a mere 5 weeks for a single man, Howard Scott Warshaw, to develop the game. As you might expect, that didn’t turn out so well.
The end result was a game that was critically panned, and rightly so. Controlling the titular alien, players wander round and fall into pits. In some of these pits are telephone parts, and collecting these is the aim. There are a lot of pits. There’s a lot of falling. Often, you’ll levitate out of a pit only to immediately fall back in. This tends to repeat itself. Riveting stuff, I’m sure you’ll agree. In the words of The A.V. Club’s Nathan Rabin, ‘Atari’s E.T. has cured me of my desire to play videogames of any kind for the indefinite future,’ which is about how it made most people feel.
The critical drubbing was the least of Atari’s problems however. A case of severe optimism had led to the reported manufacture of 4 million game cartridges. About 1.5 million were eventually sold, which would have been great, if it didn’t leave another 2.5 million lying about. Add to this plenty of returned copies, and Atari found themselves with an awful lot of product lying around. Hence the landfill.
The end result was that E.T. made back about $25 million of its $125 million production costs. Which, a bit of GCSE maths tells me, means a net loss of $100 million. Not good news. You might be beginning to see how this led to trouble for the industry. Following another high-profile failure the year before, their adaptation of Pac-Man, Atari were in financial trouble. Further to that, the overwhelming anticipation for E.T., followed by its crushing reception, destroyed many’s faith in Atari. The company, and its console, became associated with cheap, low quality games. Along with a sharp increase in competition, and a flood of other poor quality releases, E.T. is widely held to be a principal cause of the 1983 industry collapse. From 1983 to 1985, industry-wide revenue fell from $3.2 billion to a mere $100 million. A huge number of developers, publishers, and manufacturers closed their doors, and few would have predicted then that the industry would ever return to the sort of profitability it enjoys now.
Of course, the blame can’t all be placed on one game. But E.T. was such a huge failure, and so perfectly captures the laziness and cynicism of Atari at the time, that it’s hard not to see it as a symbol of the industry’s collapse. Never before, or since, has there been a higher profile failure in gaming. E.T. was both a critical and commercial failure, the result of Atari’s hubris, and almost destroyed the industry. It’s hard to top that. If you want to try the game yourself, I hear there are a few copies kicking around in New Mexico…