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the rise and fall of arcade


the rise and fall of arcade

Postby admin » Tue Jul 14, 2015 1:38 pm

https://medium.com/@josh_taylor/virtual ... f3f92b52e8
The beginning of the video arcade can be attributed to the formation of Atari Inc. by Nolan Bushnell and the subsequent creation of Pong, a coin-op version of the ping-pong game released on the Magnavox Odyssey. The Odyssey was a home console that was released in August 1972, three months prior to the release of the coin-op Pong. Throughout the 70s, arcades began to expand and grow with major players entering the scene such as Taito, Midway (purchased by Bally in 1969), Namco, Nintendo, and Sega. In 1977, the gaming industry would experience a small crash. The golden age of arcades would immediately follow in 1978, marked by Taito’s release of the widely popular Space Invaders. The golden age would come to an end with the North American gaming crash of 1983. By the end of the golden age, the number of full arcades in North America peaked at 10,000. Globally there were 24,000 full arcades, 400,000 street locations, and 1.5 million video arcade games in operation. For reference, McDonald’s currently has 36,000 locations globally. The arcade revenue during the golden age was unprecedented.

Graph generated with data from Electronic Education, The Video Game Explosion, and Silicon Valley Fever.
The arcade reached its peak at $8 billion ($19.6 billion in today’s dollars) in 1982. For reference, in 1982, the pop music industry made $4 billion and Hollywood made $3 billion.

In the 70s and early 80s, arcades were a location to show off the latest innovations before the features reached the home. Home systems were just samples of what the arcades could provide. During the 70s and early 80s the home systems also began their rise to prominence with the Atari 2600 selling 30 million units; compare this to the widely popular Nintendo 64 that sold 33 million units two decades later. The home console market was growing with the arcade and projected to reach around $2 billion ($4.9 billion in today’s dollars) by the end of 1982. There was a mutualistic symbiotic relationship between the arcades and home consoles. People were comfortable playing at home but they would come out to arcades to see the latest improvements in the video game industry. Arcades became a location where people could meet other people with a shared interest in gaming. Socializing was at the core of arcades.

Failure of the North American Arcade
It’s the end of the world as we know it

Excess Atari games that had been dumped in a landfill during the crash.
The failure of the North American arcade is a direct result of the 1983 crash of the North American gaming industry and the arcade’s inability to recover. The main cause of the crash was over-saturation of the market. However, other factors were at play such as the global recession of the early 80s as well as content stagnation in the gaming industry from the major players. The 1983 crash lasted until 1985 and completely destroyed the gaming industry for those two years. This crash brought an immediate end to the golden age of arcades. In 1983, Atari was producing games for arcade, console, and computer platforms and lost half a billion dollars ($1.2 billion in today’s dollars) due to the crash. Losses across the entire industry totaled $1.5 billion ($3.6 billion in today’s dollars). Mattel, the third largest video game maker, left the market. The crash was very painful for arcade owners and in the first year 2,000 arcades closed out of the 10,000 operating in North America. The arcades that remained had severely limited options for content, given that the game industry wasn’t producing good titles and gamemakers were leaving the market. It is important to note that the entire North American gaming industry crashed, including the largely successful home console market. After the crash, many home consoles left the market. The most popular console at the time, the Atari 2600, was no longer being pushed due to lack of development and the 1984 sale of Atari Inc.’s Consumer Division to Commodore Business Machines.

The crash finally came to an end in 1985 with the introduction of the NES home console in North America by Nintendo. This introduction into the industry reignited the home console market, but there was never any similar factor that reignited the arcade market. Accordingly, arcades continued their slow decline into nonexistence. Many have outlined potential factors to explain the arcade’s inability to recover from the 1983 crash. First, public confidence in the market was at an all time low. The market was new and its meteoric rise and crash seemed like a bubble. However, in 2015 the game industry’s size is estimated to be $88.4 billion and projected to rise to $102.9 billion in 2017, the crash was just an early stumble by an undeveloped industry. Second, arcades require larger and recurring capital investment to maintain than home consoles. Every arcade cabinet was a single game and each cabinet could cost up to $3,000 ($7,000 in today’s dollars). If an arcade owner wanted to make it possible for three people to play Pac-Man, for instance, at one time, that owner needed to purchase three cabinets dedicated to Pac-Man. The arcade cabinet model was simple: given a set price for the cabinet, the arcade owner knew exactly how many plays would be required before (s)he would start to make money on that machine or else they would lose money. Every purchase of a cabinet was a gamble and required a lot of money up front with the hope of a return.

While the arcades were struggling, the NES console, named the single greatest console in history by IGN in 2009, was doing extremely well. After the NES rose in popularity in North America, the prevailing thought seemed to be that this was proof that home consoles had won over arcades. In retrospect, people were comparing an industry that had been destroyed to one of the greatest consoles of all time that launched with Super Mario Bros, named the best video game of all time by IGN in 2005 and 2007. Japan did not see the same game industry crash that North America did and arcades continued to flourish in Japan even with the NES, released two years earlier in Japan in 1983. And because the North American game industry believed that the home console was the future, it became a self-fulfilling prophecy. Major attention was diverted away from the arcade to the home console and Nintendo made the brilliant decision to allow third-party developers to build for its console. So the phrase was passed down and became truth: “The home console killed the arcade.” Instead, this phrase more accurately should be: “The arcades were left to die.” Arcades, left with little option but to reproduce gaming content already available on home consoles, no longer became the draw for new content to customers who could play the same content at home. Independent of the home system, arcades died as soon as they stopped being a window to the future.
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