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asked fellow ampex employee larry bryan to participate and while he had been on board with their ideas he backed out when asked to contribute financially to starting the company 8 bushnell and dabney worked with nutting associates to manufacture their product dabney developed a method of using video circuitry components to mimic functions of a computer for a much cheaper cost and a smaller space bushnell and dabney used this to develop a variation on spacewar called computer space where the player shot at two ufos nutting manufactured the game while they were developing this they joined nutting as engineers but they also made sure that nutting placed a syzygy engineered label on the control panel of each computer space unit to reflect their work in the game 6 9 computer space did not fare well commercially when it was placed in bars nutting s customary market feeling that the game was simply too complex for the average customer unfamiliar and unsure with the new technology bushnell started looking for new ideas 10 about 1 500 computer space cabinets were made but were a difficult product to sell while bushnell blamed nutting for its poor marketing he later recognized that computer space was too complex of a game as players had to read the instructions on the cabinet before they could play bushnell said to be successful i had to come up with a game people already knew how to play something so simple that any drunk at any bar could play 8 as a private company edit founding and pong 1972 edit the original pong upright cabinet bushnell began seeking other partners outside of nutting and approached pinball game manufacturer bally manufacturing who indicated interest in funding future efforts in arcade games by bushnell and dabney if nutting was not involved 6 the two quit nutting and established offices for syzygy in santa clara 11 at that point not yet taking a salary since they had no products 6 bally then offered them us 4 000 a month for six months to design a new video game and a new pinball machine 6 with those funds they hired al alcorn a former co worker at ampex as their first design engineer 8 initially wanting to start syzygy off with a driving game bushnell had concerns that it might be too complicated for alcorn s first game 10 in may 1972 bushnell had seen a demonstration of the magnavox odyssey which included a tennis game according to alcorn bushnell decided to have him produce an arcade version of the odyssey s tennis game 12 13 14 which would become known as pong bushnell had alcorn use dabney s video circuit concepts to help develop the game believing it would be a first prototype however alcorn s success impressed both bushnell and dabney leading them to believe they had a major success on hand and prepared to offer the game to bally as part of the contract 6 meanwhile bushnell and dabney had gone to incorporate the firm but found that a company called syzygy an astronomical term already existed in california bushnell enjoyed the strategy board game go and in considering various terms from the game they chose to name the company atari a japanese term 当たり that in the context of the game means a state where a stone or group of stones is imminently in danger of being taken by one s opponent equivalent to the concept of check in chess 6 other terms bushnell had offered included sente when a go player has the initiative bushnell would use this term years later to name another company of his and hane a go move to go around an opponent s pieces 8 atari was incorporated in the state of california on june 27 1972 8 15 bushnell and dabney offered to license pong to both bally and its midway subsidiary but both companies rejected it because it required two players instead bushnell and dabney opted to create a test unit themselves and see how it was received at a local establishment 6 by august 1972 the first pong arcade cabinet was completed it consisted of a black and white television from walgreens the special game hardware and a coin mechanism from a laundromat on the side which featured a milk carton inside to catch coins it was placed at andy capp s a local tavern in sunnyvale to test its viability 16 the test was extremely successful so the company created twelve more test units ten of which were distributed across other local bars 6 they found that the machines were averaging around us 400 a week each in several cases when bar owners reported that the machines were malfunctioning alcorn found that it was because the coin collector had been overflowing with quarters shorting out the coin slot mechanism 6 they reported these numbers to bally who still had not decided on taking the license bushnell and dabney realized that they needed to expand on the game but formally needed to get out of their contract with bally bushnell told bally that they could offer to make another game for them but only if they rejected pong bally agreed letting atari off the hook for the pinball machine design as well 6 after talks to release pong through nutting and several other companies broke down bushnell and dabney decided to release the game on their own 10 and atari inc transformed into a coin op design and production company using investments and funds from a coin operated machine route they leased a former concert hall and roller rink in santa clara to produce pong cabinets with hired help for the production line bushnell had also set up arrangements with local coin op game distributors to help move units atari shipped their first commercial pong unit in november 1972 over 2 500 pong cabinets were made in 1973 and by the end of its production in 1974 atari had made over 8 000 pong cabinets 17 atari could not produce pong cabinets fast enough to meet demand leading to a number of existing companies in the electro mechanical games industry and new ventures to produce their own versions of pong 18 ralph h baer who had patented the concepts behind the odyssey through his employer sanders associates believed that pong and these other games infringed on his ideas magnavox filed suit against atari and others in april 1974 for patent infringement 19 under legal counsel s advice bushnell opted to have atari settle out of court with magnavox by june 1976 agreeing to pay 1 500 000 in eight installments for a perpetual license for baer s patents and to share technical information and grant a license to use the technology found in all current atari products and any new products announced between june 1 1976 and june 1 1977 20 21 early arcade and home games 1973 1976 edit around 1973 bushnell began to expand out the company moving their corporate headquarters to los gatos 22 bushnell contracted graphic design artist george opperman who ran his own design firm to create a logo for atari opperman has stated that the logo that was selected was based on the letter a but considering atari s success with pong created the logo to fit the a shape with two players on opposite sides of a center line however some within atari at the time dispute this stating that opperman had provided several different possible designs and that this was the one selected by bushnell and others the logo first appeared on atari s arcade game space race in 1973 and became known as the fuji due to its resemblance to mount fuji in 1976 atari hired opperman to establish the company s own art and design division 23 from late 1972 to early 1973 a rift in the business relationship between bushnell and dabney began to develop with dabney believing he had been pushed to the side by bushnell who saw dabney as a potential roadblock to his larger plans for atari 22 by march 1973 dabney formally left atari selling his portion of the company for us 250 000 24 22 25 while dabney would continue to work for bushnell on other ventures including pizza time theaters he had a falling out with bushnell and ultimately left the video game industry 6 in mid 1973 atari acquired cyan engineering a computer engineering firm founded by steve mayer and larry emmons following a consulting contract with atari bushnell established atari s internal grass valley think tank at cyan to promote research and development of new games and products 26 in september 1973 atari secretly spawned a competitor called kee games 27 headed by bushnell s next door neighbor joe keenan to circumvent pinball distributors insistence on exclusive distribution deals both atari and kee could market virtually the same game to different distributors with each getting an exclusive deal 28 kee was further led by atari employees steve bristow a developer that worked under alcorn on arcade games bill white and gil williams while early kee games were near copies of atari s own games kee began developing their own titles which drew distributor interest to the subsidiary and helped bushnell realize the disruption of the exclusive distribution deals 28 in 1974 atari began to see financial struggles and bushnell was forced to lay off half the staff 26 atari was facing increased competition from new arcade game producers many which made clones of pong and other atari games an accounting mistake caused the company to lose money on the release of gran trak 10 26 atari also tried to open atari japan a division to sell their games in japan but the venture had several roadblocks in a 2018 interview alcorn described the situation as an utter disaster beyond recognition 29 bushnell said we didn t realize that japan was a closed market and so we were in violation of all kinds of rules and regulations of the japanese and they were starting to give us a real bad time 29 ron gordon who had established his own international distribution company multi national corporation learned of atari s problems in international markets and in 1973 introduced himself to bushnell to help gordon worked on commission through his company helping atari sell to europe as well as reducing their costs by shipping only the circuit boards for their arcade games and letting local manufacturers supply the chassis and display 30 29 john wakefield atari s first president believed that the company should own its own international distribution channels establishing atari japan and atari pacific and computer games ltd for hawaii and south korea but these failed to gain interest and contributed to atari s 1974 financial issues 30 gordon urged bushnell to fire wakefield due to the 1974 financials and following that gordon was temporarily named president of atari as to let go of the relatively new management staff and sell off the international sales subsidiaries 30 after atari japan was sold to namco for 500 000 namco would be the exclusive distributor of atari s games in japan 26 bushnell has claimed that deals arranged by gordon saved atari 31 gordon further suggested that kee games be merged into atari in september 1974 just ahead of the release of tank in november of that year tank was a success in the arcade and atari was able to reestablish its financial stability by the end of 1974 26 32 in the merger joe keenan was kept on as president of atari while bushnell stayed as ceo 28 having avoided bankruptcy atari continued to expand on its arcade game offerings in 1975 the additional financial stability also allowed the company to pursue new product ideas one of these a home version of pong a concept that atari had first considered as early as 1973 the cost of integrated circuits to support a home version had fallen enough to be suitable for a home console by then and initial design work on console began in earnest in late 1974 by alcorn harold lee and bob brown atari struggled to find a distributor for the console but eventually arranged a deal with sears to produce 150 000 units by the 1975 holiday season atari was able to meet sears order with additional 900 000 investments during 1975 the home pong console branded as sears tele game was a high demand product that season and resulted in atari having a viable home console division in addition to their arcade division 26 by 1976 atari began releasing home pong consoles including pong variants under their own brand name 33 the success of home pong drew a similar range of competitors to this market including coleco with their telstar series of consoles 26 the third version of the atari video computer system sold from 1980 to 1982 in 1975 bushnell started an effort to produce a flexible video game console capable of playing all four of atari s then current games bushnell was concerned that arcade games took about 250 000 to develop and had about a 10 chance of being successful similarly dedicated home consoles had cost about 100 000 to design but with increased competition had a limited practical shelf life of a few months instead a programmable console with swappable games would be far more lucrative 26 development took place at cyan engineering which initially had serious difficulties trying to produce such a machine however in early 1976 mos technology released the first inexpensive microprocessor the 6502 which had sufficient performance for atari s needs 26 atari hired joe decuir and jay miner to develop the hardware and custom television interface adaptor for this new console 26 their project under the codename of stella would become known as the atari video computer system atari vcs workplace culture edit atari as a private company under bushnell gained a reputation for its relaxed employee policies in areas such as formal hours and dress codes and company sponsored recreational activities involving alcohol marijuana and hot tubs 26 board and management meetings to discuss new ideas moved from formal events at hotel meeting rooms to more casual gatherings at bushnell s home cyan engineering and a coastal resort in pajaro dunes 26 34 dress codes were considered atypical for a professional setting with most working in jeans and t shirts 34 many of the workers hired early on to construct games were hippies who knew enough to help to solder components together and took minimal wages 26 several former employees speaking in years that followed described this as the common culture of the 1970s and not unique to atari 35 36 this approach changed in 1978 after ray kassar was brought on from warner initially to help with marketing but eventually took on a larger role in the company displacing bushnell and keenan and instituting more formal employee policies for the company 37 as a subsidiary of warner communications edit under nolan bushnell 1976 1978 edit before entering the home console market atari recognized they needed additional capital to support this market the company had acquired smaller investments through 1975 but needed a larger infusion of funds 21 bushnell had considered going public and tried to sell the company to mca and disney both of whom passed instead after at least six months of negotiations in 1976 atari took an acquisition offer from warner communications for 28 million that was completed in november 197...