Atari bankruptcy unsurprising amid decades of trouble

Atari Inc. filed for Chapter 11 bankruptcy on Jan. 20. It was soon followed by its French parent company, Atari S.A., formerly known as Infogrames.

Naturally, this event prompted journalists to write headlines that prominently featured the phrase, “Game Over.” Atari, known for classic games like “Pong” and “Asteroids,” has had a roller-coaster existence for decades. Its fall — though it is expected to recover after filing for bankruptcy — should not come as a surprise. The modern Atari is a remnant of an older era that struggled to find its place as the video game landscape changed.

The last 20 years have been rough for Atari, which has not had any huge successes since its Atari 2600 console in the late 1970s. In 1976, at the beginning of Atari’s golden age, the company was bought by Warner Communications for about $30 million (not adjusted for inflation); in 1998, Hasbro bought Atari for only $5 million. In those intervening 22 years, Atari saw a lot of hardship.

Atari was hit especially hard by the video game crash of 1983 after putting far too much investment behind low-quality Atari 2600 versions of “Pac-Man” and “E.T. the Extra-Terrestrial.” Those games flopped so hugely that they almost leveled the video game industry. Though its accuracy is disputed, legend has it that there is a New Mexico landfill containing millions of unsold copies of “E.T.” and “Pac-Man.”

The ensuing crash put Atari deeply in debt. It was sold to Namco to continue life as Atari Corporation. By this point, Atari Corp. bore little resemblance to the Atari that made “Pong.” The company spent years attempting to reinvent its brand with new consoles. It succeeded with the Atari 7800 but never fully rebounded to its glory days. A few buyouts later, Atari resembled its ’70s counterpart even less.

Atari’s only profitable activities in the 21st century were remaking its classic games from the “Pong” era and publishing games from other developers, notably the “Witcher” games. Even these routes were not always guaranteed to make money, and the company continued to struggle.

In 2010, Atari became profitable again by switching its focus to mobile versions of its 1970s classics, which brought in new revenue from downloads and advertising. Still, they were not enough to keep its French parent company afloat. Infogrames had been having financial difficulties since the mid-2000s. They somehow turned losses in the tens of millions every year despite owning the digital rights to “Transformers,” “Unreal Tournament” and the “Civilization” franchise. The Atari mobile games helped it achieve net profits for 2010 and 2011 but ultimately could not overcome the company’s downward spiral.

For all of Atari’s difficulties, Chapter 11 bankruptcy doesn’t mean the end of a company. Atari is expected to continue operations as usual, and it will almost certainly reemerge under new ownership. Atari probably won’t disappear, but it probably won’t return to its glory days, either.

No matter what Atari does in the 2000s, it will always be known as the company that made “Pong” and “Asteroids” in the ’70s. Now that the video game world has grown up and seen so much innovation, the games associated with the Atari name simply are not on the radar. The rich graphics, fluid gameplay and storytelling capabilities of modern titles have made the Atari classics all but obsolete.

Nowadays, who plays “Pong” for anything but nostalgia value? Nostalgia is Atari’s greatest strength at this point, but also its greatest weakness. Atari hasn’t created a successful game in decades, and it has really relied on the historical value of its arcade hits to stay relevant and profitable.

Even if Atari did disappear completely, I doubt it would be missed. The gaming community would mourn the loss of one of its pioneers — a pioneer that probably introduced a lot of us to the world of video games. But no one is especially attached to the modern Frankenstein-like incarnation of the Atari brand that just filed for bankruptcy. The Atari that we all know and love died a long time ago.

Brian Hampel is a senior in architecture. Please send comments to [email protected]