Video Game Industry Crises: A Closer Look
Popular belief suggests that the commercial failure of games such as E.T. the Extra-Terrestrial initiated the video game industry crisis of the early 1980s. This downturn was worsened by the inability to satisfy Wall Street investors’ profit expectations. In 2014, a landfill in New Mexico, rumored to be the final resting place of unsold Atari products from 1983, was excavated, revealing remnants of E.T. and Centipede game packaging.
The Crash of 1983: A Dramatic Downturn
The video game market experienced a catastrophic collapse in 1983, plummeting from an estimated global worth of $42 billion in 1982 to just $14 billion by 1985. This downturn was devastating for an industry that had appeared to be on an unstoppable growth trajectory. Similar to many economic downturns, numerous myths have emerged surrounding its causes and consequences. Common narratives attribute the crash to a mix of subpar games—most notably E.T. the Extra-Terrestrial—the rise of personal computers, and the increasing variety of gaming consoles available to consumers. These narratives have been widely embraced and propagated by historians, social media figures, and popular culture.
Echoes of the Past: The 2025 Crisis
As we look ahead to 2025, the video game industry seems to be facing another significant downturn. This year alone, according to GamingLayoffs.com, the industry has collectively laid off 3,563 game developers. Reports from Kotaku indicate that Virtuous Ltd., known for its success with The Elder Scrolls: Oblivion Remastered, is set to cut 300 jobs.
Understanding the Underlying Issues
The similarities between the 1983 crash and the current situation in 2025 suggest that both events share a common thread: a muddled understanding of the root causes among media, historians, and influencers. The gaming industry serves as a barometer for broader capitalist trends, as video games are often seen as luxury items—no one’s survival hinges on playing titles like Donkey Kong Country or acquiring the latest Call of Duty. This context allows industry leaders to engage in increasingly aggressive profit-seeking behavior that goes beyond what might be acceptable in more essential sectors.
The Reality of Game Sales and Expectations
In 1983, Atari’s version of Pac-Man, labeled as one of the worst games ever created, still managed to sell seven million copies. While this figure seems impressive, it fell short of the company’s expectations of twelve million units, which would have required virtually every Atari console owner plus an additional two million purchasers. Fast forward to 2025, and despite The Elder Scrolls: Oblivion Remastered selling nine million copies—many in a digital format that bypassed traditional manufacturing costs—the studio responsible for its development is facing mass layoffs.
Corporate Responsibility and Market Pressures
Atari’s financial struggles in the early ’80s, particularly with Pac-Man and E.T. the Extra-Terrestrial, were partly attributed to the company’s policy requiring developers to repurchase unsold games from retailers. However, this was not the sole factor in the industry’s crash; the real issue lay with corporate executives. In 1982, Atari’s parent company, Warner Communications, projected a mere 15% revenue increase, a significant drop from the previous forecast of 50%. This led to panic among investors, resulting in stock sell-offs and a withdrawal of investment funds.
The Strain on Developers
Video game development is capital-intensive and necessitates a highly skilled workforce, with many developers holding degrees in computer science or software engineering. However, the industry is notorious for its “crunch” periods, where poor management forces workers into grueling 60 to 80-hour workweeks without overtime or sick leave. Reports indicate that around half of industry employees have faced crunch, leading to serious health issues, including anxiety, PTSD, and even physical ailments like ulcers.
Capitalism’s Role in the Gaming Industry
As children, we delight in playing games that let us step into the shoes of super spies, plumbers, or magical heroes. Yet, we are also taught that capitalism revolves around achieving success and generating profit. Gaming journalist Stephanie Sterling articulates a critical viewpoint: “Games are not too expensive to make—executives are too expensive to pay.” The individuals profiting in the gaming sector typically do not engage in the actual creation of games, assuming none of the financial risks while their decisions can adversely affect thousands of lives.
Conclusion: The Impact of Investor Expectations
The narrative of capitalism, particularly within the video game industry, starkly reveals that mere success is insufficient. Even profitable projects can lead to job losses as investors continually demand unsustainable profit margins, making mass layoffs a grim reality in the pursuit of perceived perpetual growth. Ultimately, it was not E.T. that caused Atari’s demise—rather, it was the relentless demands of capitalism.
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