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Nolan Bushnell

Legal NameNolan Kay Bushnell
BornFebruary 5, 1943
Clearfield, Utah
United States
OccupationBusinessman
Co-founder of Atari
Founder of Chuck E. Cheese
Known ForAtari VCS
Pong
Years active1971-1978

Nolan Bushnell - Biography

Many people believe that Nolan Bushnell, the founder of Atari created the first video game and has even been referred to as the father of video games. It is true that Nolan Bushnell plays a large role in video game history as he was the first person to be successful in commercializing a video game, but he is not responsible for the creation of the first video game.

While Bill Pitts and Hugh Tuck’s “Galaxy Game” can be considered the first coin-operated video game it wasn’t a true video arcade game as it ran on computer hardware distributing software to various remote terminals. Nolan Bushnell’s “Computer Space” established the basic form that all arcade games after would follow as it used a dedicated computing device built to play only that one game. This reduced the cost of manufacturing multiple units as the machine would not require an expensive computer to run only one game.

In 1971, Bushnell and colleague Ted Dabney formed an engineering company named Syzygy with the idea to create a “Spacewar!” clone known as Computer Space which would not use a computer to function thus giving it the ability to be profitable. In August of 1971 Nutting Associates a manufacturer of electro-mechanical coin-operated games hired Syzygy to create “Computer Space”. Production began immediately and by the end of the year they constructed over 1,000 units. Bushnell’s creation became the first commercially sold coin-operated video game as well as the first commercially sold video game of any kind, predating the Magnavox Odyssey by six months.

Computer Space Cabinet
Computer Space – 1st commercial video arcade game

Even though “Computer Space” was the first widely available video arcade game it was a commercial failure as fewer than 1,000 units were sold. The gameplay was too complicated for the general public to grasp and Bushnell felt that Nutting Associates did not market the game very well. “Computer Space” was an engineering breakthrough as the entire system used solid-state components making it cost efficient to produce which opened up the video arcade market to new possibilities.

In 1972, Nolan Bushnell and Ted Dabney decided to end the partnership they had with Nutting Associates in hopes to make it on their own. Bushnell found out that the name “Syzygy” was already in use by another company and incorporated under the name Atari, named after a strategic move in the Japanese board game “Go” which was Bushnell’s favorite game. Atari rented their first office space in Sunnyvale, California and secured a contract to create a driving game for Bally Manufacturing.

Atari soon hired Al Alcorn as their first design engineer to create the driving game they had contracted with Bally Manufacturing to create. Bushnell wanted Alcorn to create a simple ping pong style game as a test of his abilities before working on the driving game for Bally. This simple test resulted in the creation of “Pong” the game that revolutionized the video arcade industry and one of the most well-known games of all time. Bushnell and Dabney were so impressed by the prototype of this training assignment that they gave to Alcorn that they felt it could be a profitable product and decided to test its marketability.

Nolan Bushnell G4 Documentary and the history of Chuck E. Cheese

Nolan Bushnell Documentary
The Video Game Genius Behind Chuck E. Cheese’s

Creation of Pong

Pong Cabinet
Atari’s 1972 Pong the first video game to reach mainstream popularity

A few days prior to asking Alcorn to create a ping pong style game, Bushnell attended a demonstration of the Magnavox Odyssey where they had on display a similar ping pong game among many other games. The difference was the Odyssey used screen overlays for most of the graphics were Bushnell’s “Pong” would not require the use of screen overlays. Alcorn incorporated many of his own improvements into the game design such as score keeping and sound. The similarity between “Pong” and the ping pong game that Bushnell seen on display by Magnavox Odyssey led to a long-lasting lawsuit.

In September 1972 Atari installed the “Pong” prototype at a local bar named Andy’s Capp’s Tavern. “Pong” was well received, and its popularity grew throughout the week. Bushnell demonstrated “Pong” to executives at Bally as he intended to use Pong to fulfill his contract with Bally rather than the driving game originally agreed upon. Before Bally made a decision to move forward with licensing “Pong” an issue with the prototype was reported by the local bar. Alcorn inspected the machine to discover the issue with the machine was the coin mechanism was jammed due to an overflow of quarters.

PongOnce Bushnell learnt how successful the “Pong” prototype was he decided that they would be more profitable to manufacture the game rather than license it out to Bally. Bushnell was able to get out of the deal with Bally since they did not come to a final decision yet. Atari initially had difficulty finding financial backing for “Pong” but eventually obtained a line of credit with Wells Fargo that they used to expand their facilities to house an assembly line. Being strapped for cash Atari recruited their assembly workers at local unemployment offices. At first the arcade cabinets were produced very slowly taking roughly 10 days, many of which failed quality testing. Atari was able to streamline the process quickly and began producing systems in greater quantities.

When pong was released in 1972 it became the first video game to reach mainstream popularity which led to the start of the commercial video game industry. By 1973 Atari shipped 2,500 orders of Pong and sold the machines at three times the cost of production which provided them with a steady source of income to ramp up production. By the end of 1974 Atari sold more than 8,000 units going on to sell more than 35,000 units worldwide during it lifespan. Soon after its release, several companies seeing the success of Pong started producing clones. At the time Atari couldn’t do much about the competitors as they did not have patents on the solid-state technology used in the game. Atari did however file for patents but due to complications around the timing on when they were submitted delayed the process. Bushnell’s solution to competing against the company’s producing clones was to produce more innovative games and concepts.

The companies that were producing clones of “Pong” kept Atari from dominating the video arcade game market. “Pong” and the clone versions became so successful that video arcade games started appearing in shopping malls, restaurants, grocery stores, bars, movie theaters and bowling allies among other places. Soon video arcade systems would start replacing rows of pinball machines in the local arcades.

The success of “Pong” drew the attention of Ralph Baer and Sanders Associates. Sanders Associates had an agreement with Magnavox who purchased the licensing rights to Ralph Baer’s “Brown Box” for their Odyssey system with Magnavox to handle sublicensing, which included dealing with infringement on their exclusive rights. Magnavox initially did not pursue legal action against Atari or any of the companies that produced “Pong” clones but Sanders Associates continued to pressure Magnavox for three years and in 1975 Magnavox filed suit against Atari as well as a few of the companies that produced “Pong” clones. Magnavox argued that Atari had infringed on Baer’s patents as well as the concept of electronic Ping-Pong based on detailed records that Sanders Associates kept on the design process of the “Brown Box” dating back to 1966. Magnavox also provided a signed guest book that was signed by Nolan Bushnell from when he attended a demonstration of the Odyssey were they had their table tennis game on display.

Bushnell estimated the legal costs in the millions and decided to settle with Magnavox out of court. Atari agreed to become a licensee for $700,000 and the companies producing “Pong” clones would have to pay royalties, in addition to the agreement Magnavox would obtain the rights to Atari products developed over the next year. Atari decided to delay the release of their products for a year to avoid Magnavox obtaining rights to their products and withheld information from Magnavox’s attorneys during visits to their facilities.

Expanding the arcade market

Tank Arcade Cabinet
1974 Tank! The game that saved Atari from bankruptcy

In 1973 over half of the ping pong style games on the market were “Pong” clones and Atari continued to come up with innovated ways to expand the company. In order to obtain as much market share as possible Bushnell approached his friend and neighbor Joseph Keenan with the idea to create Kee Games which would allow Atari to sign exclusive contracts with distributors in each geographic area to buy only Atari games. Since most geographic areas had two distributions, Bushnell secretly created Kee Games, which was named after Joseph Keenan, who Nolan Bushnell hired to be president of the company. This allowed Kee Games to sign exclusive contracts with the second distributor in the geographic area. Keenan obtained a few employees from Atari to get started and began advertising Kee Games as a competitor of Atari but in reality, it was subsidiary of Atari. Kee Games originally released clone versions of Atari games with unique names and some minor cosmetic differences giving Atari the ability to sell exclusive deals with two distributors at once since the distributors were unaware of the relationship between Kee Games and Atari.

Atari continued to lead the industry in innovation and in 1974 they released “Gran Trak 10” the first racing video game controlled by a steering wheel, gear shift, gas pedal and brake pedal attached to the arcade cabinet. The purpose of the game was to race against the clock on a single track with the player’s car being the only car on the track. Oil slicks on the track made the player’s car spin-out and the side of the track had to be avoided at all costs. “Gran Trak 10” was the first game to use ROM memory and Atari took an inventive approach to combat piracy. When Atari was assigning part numbers for their custom designed ROM chip for “Gran Trak 10” they decided to use the same part number as a Texas Instruments Arithmetic Logic Unit so that when pirates tried to create their own version, they’d end up ordering the wrong part and their clones would not work.

Even though “Gran Trak 10″ was innovative and original it still almost single handedly bankrupt Atari due to engineering flaws and accounting errors. The original design had engineering flaws were Al Alcorn had to step in and fix before the game could go into production. The fix created costly rework and delays but Alcorn was able to resolve the issues. There was also an unfortunate accounting error that had “Gran Trak 10” selling for $100 less than it cost to manufacture. These issues ended up costing Atari $500,000 and later in 1974 they repackaged the game into a smaller cabinet and renamed the game to “Trak 10”. The new design allowed the cabinet to fit into smaller spaces such as bars, grocery stores and Laundromats could set aside for games.

In November 1974 Kee Games introduce “Tank!” their first original title which was so successful that it saved Atari from bankruptcy in 1974. “Tank!” is a two player tank combat game where players would move their tanks through a maze having to avoid mines while shooting at each other. Each player controlled their tank on the screen with two joysticks with a button mounted on top of the right joystick to shoot. “Tank!” became an instant hit for Kee Games and it was so popular that by the end of the year distributors no longer demanded exclusive rights from companies.

Atari was having cash flow problems due to the issues they had with “Gran Trak 10” as well as an unsuccessful attempt to venture into the Japanese market. Kee Games on the other hand wasn’t having any cash flow issues and with the success of “Tank!” they were doing amazingly. In December of 1974 Atari made it public knowledge that Kee Games was a wholly owned subsidiary of Atari and by the end of the year the two companies merged together. Atari then started producing “Tank!” under the Atari label and promoted Joseph Keenan to president of Atari allowing him to run the business side of things thus giving Bushnell the ability to focus on engineering and innovation. Atari continued to use the Kee Games label to release some of their games up until 1978 but from the merger on, the games were clearly labeled “a wholly owned subsidiary of Atari, Inc.”.

Entering the home video game market

Atari was extremely successful in the video arcade market, so they decided the next logical step was to expand into the home video game market. It was 1974 when Atari started to design a home version of “Pong” an idea that was proposed by engineer Harold Lee. At the time there was only one company in the home video game market which was Magnavox. With the Odyssey not being adopted by many customers mainly due to the misconception of it only being compatible with Magnavox television sets it seemed like the perfect time for Atari to take a stab at the home video game market.  Atari was able to incorporate advance features into their “Pong” home console that gave them an edge of their competitors. The system used a single chip that provided the game with digital onscreen scoring and sound.

In 1975, Atari started looking for ways to distribute their new home “Pong” system but it wasn’t easy finding a distributor due to the track record that Magnavox had with the Odyssey. Retailers felt the price of the system was too expensive to draw an interest from the general public. After being rejected by numerous toys and electronics manufacturers Atari tried contacting Sears & Roebuck to see if they would have any better luck trying to work out distribution agreement. They were directed to Tom Quinn who was the buyer for Sears’ sporting goods department, and he expressed interest but wanted the system demonstrated for a few executives first. Al Alcorn travelled to Chicago to demonstrate the pong home system prototype for the Sears executives and despite some minor technical issues with the prototype was able to obtain their approval.

Pong Home Console
Atari’s “Pong” home console released under Sears’ Tele-Games brand in 1975

Now that the executives gave their blessing, Quinn started to work with Nolan Bushnell to see if they could reach an agreement. Quinn wanted exclusive rights to the system as well as 150,000 units before the holiday season. Bushnell agreed to the terms even though he knew that Atari would not be able to produce 150,000 units with their current facility. Atari acquired a new factory through funding by venture capitalist Don Valentine in order to produce the promised 150,000 units for Sears. In the end Atari was able to fulfill the order for Sears. All systems manufactured in 1975 were branded with Sears’ “Tele-Games” name but in 1976 Atari started releasing a version under their own brand name.

Legality Issue

The success of home pong just like the video arcade version resulted in a multitude of clone pong consoles. Unlike the Magnavox Odyssey the home pong console and the clone consoles were only able to play one game “Pong”. Even with the limited ability of playing just one game the Pong systems became extremely popular and easily outsold the Odyssey.

The success of the arcade version of “Pong” drew the attention of Ralph Baer and Sanders Associates, who were already pressing Magnavox to pursue legal action against Atari for patent infringement. The release of the home version of “Pong” made the similarities between “Pong” and Odyssey’s Table Tennis game even more in Magnavox favor as they were both playable in console form on a standard television set. Magnavox filed suit against Atari as well as other companies that were making clone “Pong” systems in 1975. Magnavox argued that Atari had infringed on Baer’s patents as well as the concept of electronic Ping-Pong based on detailed records that Sanders Associates kept on the design process of the “Brown Box” dating back to 1966. Magnavox also provided a signed guest book that was signed by Nolan Bushnell from when he attended a demonstration of the Odyssey were, they had their table tennis game on display.

Bushnell estimated the legal costs in the millions and decided to settle with Magnavox out of court. Atari agreed to become a licensee for $700,000 and the companies producing “Pong” clones would have to pay royalties, in addition to the agreement Magnavox would obtain the rights to Atari products developed over the next year. Atari decided to delay the release of their products for a year to avoid Magnavox obtaining rights to their products and withheld information from Magnavox’s attorneys during visits to their facilities.

The Creation of the Atari VCS

Atari purchased an engineering Research and Development Company called Cyan Engineering in 1973 to have a division of Atari that would be focused solely on next generation video game systems. This branch of Atari had been working on a prototype known as “Stella” which unlike prior generations of consoles had a CPU core that would allow it to play multiple games on removable media. The core of the prototype was a cost-efficient version of the famous MOS Technology 6502 known as the 6507. Well “Stella” was in development Fairchild Semiconductor released their CPU based system beating Atari to the market and forcing them to pump additional funds into the development of “Stella”.

Atari’s prototype was still not ready for production, but it was clear to Atari that they needed to release their system before the market was flooded with similar clone systems which had happened after the release of their Pong system. Atari needed to get their system on the market quickly but just did not have the cash flow to get the system completed quickly. Nolan Bushnell ended up approaching Warner Communications and sold the company to them in 1976 for $28 million. With the newly found revenue from the sale to Warner Communications, Atari was able to ramp up the development of Stella and by the time it was ready for release the development had cost approximately $100 million.

Atari launched its prototype in October 1977 under the name Atari VCS for Video Computer System and is the system that is credited with popularizing the use of microprocessor based hardware with cartridges containing game code. The system came bundled with two joystick controllers, a pair of paddle controllers and one game cartridge of “Combat”. Combat was based on two earlier coin-operated arcade games produced by Atari, Tank and Anti-Aircraft II.

Atari 2600 Woodgain
The Atari VCS is credited with popularizing the use of microprocessor based hardware with cartridges containing game code.

The Atari VCS retailed for $199 and had eight additional games available at launch that sold separately. The games that were available at launch were Blackjack, Air-Sea Battle, Indy 500, Basic Math/Fun with Numbers, Star Ship, Street Racer, Surround, Video Olympics and Combat which was sold with the system until 1982. Since Atari already had a relationship with Sears for the distribution of their Pong console, they looked to capitalize on this to compete against the Fairchild Channel F and play some needed catch-up as they released the Atari VCS 14 months after the Channel F was released. The systems that were distributed through Sears, Roebuck and Company stores were rebranded as the Sears Video Arcade. Between Atari’s popular brand name in the Arcades and with their Pong home system and Sears household name the Atari VCS was able to sell 250,000 systems in 1977.

The home video game market was weak in 1978 due to the amount of Pong clones that had been made obsolete by the newer and more powerful systems. Both the Channel F and Atari VCS found themselves in the midst of a vicious round of price-cutting due to this as Pong clones were sold off to discounters for very low prices. Many clone companies were going out of business due to the saturation of the market and both Fairchild and Atari found themselves selling to a market that was completely burnt out on Pong. Atari managed to sell only 550,000 units of the 800,000 that were manufactured in 1978 leading to further financial support needed from Warner Communications to cover their losses. The merger of Atari with Warner Communications led to Nolan Bushnell having less say within Atari and disagreements on development of projects and the direction the company was headed; this ultimately led to Nolan Bushnell leaving the company in November of 1978.

When Atari first merged with Warner Communications Nolan signed a non-competitive agreement which he did not think much of at the time as the thought of leaving Atari was not something that ever crossed his mind. The non-competitive agreement that he signed would ban him from working in the industry that he helped build and pioneer. Unable to work in the industry Nolan had to shift his focus elsewhere. Nolan Bushnell founded Chuck E. Cheese’s Pizza Time Theatre while at Atari in 1977. Bushnell’s experience in the amusement park industry and love for entertainment influenced the concept of Pizza Time Theatre. The first location opened in San Jose, California in 1977 as an entertainment restaurant and indoor arcade. When Bushnell parted ways with Atari he purchased the Pizza Time Theatre concept from Warner Communications. Nolan Bushnell over the next several years focused on Chuck E. Cheese before moving his focus to developing new innovative products.