How The Video Game Industry Was Launched 40 Years Ago ...

from the well-look-at-that dept

Chris Stokel-Walker, over at Buzzfeed, has an absolutely fantastic feature article all about the creation of the video game Pong by Atari. 40 years ago, this week, Atari delivered the first 12 Pong machines (outside of a prototype at a local bar that proved how addictive the game was). The full article is wonderful, with tons of well-researched details. You should absolutely go read it. But one bit that might be interesting to folks around here: this game, which nearly everyone agrees launched the entire video game industry (now pushing $80 billion per year), was based on infringement. Actually, it looks like Atari's founding was basically based on copying games. Before Pong, it had a different video game console, called Computer Space, which was basically a copy of Spacewar!, a game created by MIT student Steve Russell in 1962.

However, it was Pong that set the world on fire. And... it was almost entirely based on Nolan Bushnell copying someone else's idea:

Meanwhile, the first TV-based home console, the Magnavox Odyssey, designed by gaming-industry forefather Ralph Baer, was being released. The Odyssey was demonstrated in Burlingame, California, on May 24, 1972. "It turned out that Al started at Atari almost exactly the same day I went up to see the Magnavox game," says Bushnell. Around the same time, Baer was at Tavern on the Green in Central Park, sitting amongst the 30 or so East Coast retailers to whom his employers were trying to sell his creation. Beaming with pride, Baer could barely sit still. "The entire Magnavox product line for 1972 was displayed there," he explains. "That included the Odyssey game, which was the hit of the show." One of the games on the Magnavox console was a version of tennis.

"I thought the game was kind of crappy," Bushnell says. Yet people were lining up to play it, "and they were kind of having some fun. I thought, If they can have fun with this shite" ? Bushnell breaks off into a hearty laugh ? "if it can be turned into a real game, that'd be great." On the drive back from the demonstration, "I got thinking of ways it could be improved."

Boom. Bushnell had someone on his team: re-create that basic tennis-like game for arcade machines. And that's what they did. But, they made some improvements. This is, of course, the nature of how innovation works. Two key steps: build on the idea that you see elsewhere... and figure out a way to make people love it. And that's what happened. This, once again, highlights the difference between invention and innovation in a fairly striking manner. And, while the creator of the Magnavox tennis game, Baer, wasn't thrilled about it, the article makes it clear he grudgingly admires Bushnell's ability to take that silly game and turn it into a giant industry.

Baer, the inventor of the Odyssey, is to this day ambivalent about his competitor. "Mr. B. didn't 'invent' anything," Baer, now 90, told me via e-mail, "but he started a whole industry, the arcade video game industry. Give the man credit for that achievement. He just simply didn't invent anything."

So here's the quick question: which action here was more valuable? Baer's or Bushnell's? This is one of the issues that we've tried to make for a while. For all the talk of how infringement "harms" the inventor, if someone else can build a massive market where the originator failed, isn't that better for society and the economy?

Oh, and part of the reason that the industry itself became so big, was because tons of others jumped into the market as well, often copying Atari (and, eventually, figuring out how to do it better -- which is why consoles today are from Nintendo, Microsoft and Sony... rather than Atari).

Other developers, big and small, saw the runaway success of the game and brought out their own clones to take a slice of Pong's pie. Allied Leisure released around 20,000 cabinets of Paddle Battle in March 1973. Nutting Associates, the company Bushnell and Dabney had worked with to release Computer Space, ended up releasing Computer Space Ball, which was strikingly similar to Pong. There was Paddle-Ball from Williams Electronics, and Rally from For-Play. Midway Manufacturing, then a pinball machine company, dipped their toe into the waters of arcade games with Winner in 1973.

In fact, as various studies have shown, with a developing market, it actually helps quite a bit to have lots of copying going on, because it basically cuts the marketing costs of developing that market a ton. That was clearly true with the video game market:

These manufacturers doubled down on their advantage: Not only could they piggyback on Pong's PR success, they did not have to take into account the cost of developing the game: They could simply lift its internal machinery wholesale.

Yes, the article highlights that eventually Bushnell had to pay off Magnavox, after they pulled out a broad patent "regarding interaction between machine-controlled and player-controlled elements on the screen," but Bushnell insists that he only paid out because the settlement costs were half of what it would have cost to have won in court (sound familiar?). Once again, the article quotes Baer admitting that even if he invented the game, credit has to go to Atari:

"That's the business," he says. "Most inventions are based on some prior history. Al Alcorn knew absolutely nothing about the existence of the Odyssey game ? he deserves the major credit for getting Atari started successfully."

The thing is, this isn't a unique story by any stretch of the imagination. Look into the histories of lots of developing industries and you see the same basic thing. Lots and lots of copying and building off of each other... and quite frequently it's that very fact that leads to those industries being so successful. Yet, we look to shut off that possibility due to an over-reliance on things like intellectual property, which hinders that kind of market development.

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Source: http://www.techdirt.com/blog/innovation/articles/20121129/17592021179/how-video-game-industry-was-launched-40-years-ago-thanks-to-infringement.shtml

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