Whilst reading into the history of the video game industry, I came across its almost complete demise with the release of the movie game E.T. Whilst the game was really bad, I have noticed amongst the gaming community, that it was solely responsible for the crash of 1983.
My question is simply how true are these claims? Would the crash of 1983 happened anyway? If so did the game act as a catalyst towards the crash of 1983?
On an interesting side-note question - How true are the rumours/myths about the surplus of the cartridges being buried in New Mexico?
E.T. was just the forefront of it. The reality is that even if you ignored ET the market was saturated with what could be considered, "shovel-ware." Everyone had a game. Hell, Dog food companies had a game.
What made E.T. unique was a mixture of hype and speculation. While it sold well, folks drastically over estimated how well it'd sell. It moved around 1.5 million units, but left another 2.5-3.5 million unsold. The game wasn't even that good- it's what you'd expect from a game with a little over a month of development time would produce.
Basically Atari felt it had a golden goose and drastically over estimated folks demand for the things, which would contribute a large part of the 100 million in losses (against 25 million in profit) they reported, which led to the collapse. While someone could argue this was unique to the E.T. property, I'd argue that if Atari hadn't had ET to gamble the company on when they didn't need to, they'd have found another IP to do it with. Pure speculation though.
And yes, with around 3 million unsold copies of the game which they basically couldn't give away, some ended up in landfills. Those cartridges were expensive to make but they didn't carry much inherent value. Strip everything else out and you're left with crappy proprietary flash memory storage devices.
Not at all really, it was just a symptom of the problem.
The video game crash was a classic speculative bubble. In the early days of the video game industry there were very few games and the games were rather primitive, like pong. But because there were so few games it was easy for consumers to keep informed about them, and difficult to make a bad purchase, due to the high average quality of games.
And on the production side games were becoming highly lucrative. A modest investment of the work of only a handful of people for a few months could bring in millions in revenue. This eventually brought in more and more developers trying to cash in on the market, though many of them made sub-standard games. The number of new games went from a few dozen a year to literally hundreds in a single year.
From a consumer perspective this was terrible. It became much more difficult to find out which games were worth buying. More so, games that might have been worthwhile if they were the only thing to play became undesirable against a growing library of known good games. People actually bought fewer games, because for them the expected RoI on game purchases had fallen; and they could just go back to playing the games they already had anyway. Meanwhile, the industry had leveraged itself into a position where it could only survive if revenue grew by an order of magnitude or more across the board.
That was, of course, untenable and as a result a lot of game companies went out of business. In the US it took years for game companies to regain the trust of the market, largely through games with much higher production values than had been seen before (Donkey Kong, Mario Bros, Zelda, and so on).
As to the surplus ET cartridges being burried in New Mexico, that's absolutely true.