How Alternative "Budget" Packaging Helped Keep Atari Developers In Business
Entry posted by Video 61 in Lance's Laboratory
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Hi and welcome to Lance’s Laboratory! This is the second entry of what will be my personal blog, sharing small slices of life with you from within my Lab.
For those of you who are just getting to know me for the first time, my name is Lance Ringquist, I’m from Minnesota, and for nearly 40 years I’ve been in the Atari business operating Video 61, one of the last surviving original retail Atari distributors. We started in the video business as a local chain of video rental stores serving the Twin Cities area with locations along U.S. Highway 61, the road that musician Bob Dylan referred to in the album and song Highway 61 Revisited. I also love classic "Drive-In" movies and spending time with my family and friends at my cabin up north.
For decades I’ve gotten to know you guys as my customers and friends, buying, selling and remanufacturing Atari systems, games, software, and computers, and developing my own line of Atari-compatible Video 61 games and controllers. I’m still in my Lab working away dreaming up new creations and shipping off new original Atari products, and I thought after all these years of being in the Atari community it was time to start sharing tidbits of Atari memories and Minnesota life with you here on my blog. To old friends and new, WELCOME!
This is my first BIG Blog post, and I wanted to talk about an interesting bit of Atari history that still applies today and can be helpful to homebrewers and independent developers like me:
To remain profitable if you don’t have the buying power that Atari did themselves you have to look at alternative ways of packing your products.
Having been in the Atari business for decades and running Video 61 as an independent company for nearly 40 years, I began selling Atari products in my video store when Warner still ran Atari. Once Atari got back on their feet during the Tramiel era, I became an officially authorized Atari distributor and service provider. In that time I’ve seen things in the World of Atari that you couldn’t begin to imagine. I’ve had good conversations with Jack Tramiel, I’ve had inside information on the development of games and products which Atari never released, I’ve talked with other 3rd party publishers, I’ve seen absolutely insane things happen in the world of Atari - I’ve even received death threats over this stuff. I’ve survived it all and lived to tell the story.
All through Atari’s history, smaller 3rd party game publishers came up with alternative methods for packing their products. Did you know it was common at the time for many 3rd Party Atari developers to release game cartridges, floppies, and other accessories in simple “budget” packaging such as clear inexpensive clamshell cases and plastic baggies? Some publishers even just shrink-wrapped the floppy disk and documents! (Examples are shown below, and in my Atari I/O photo gallery). Unique, alternative packaging kept costs low for the buyer, while keeping the games profitable enough for the small developers to stay in business and continue publishing Atari games and software.
The way to get the costs down is to make things in quantity. It's the same idea as shopping at Sam's Club or Costco: the more you buy the less it cost per item. Retail boxes, glossy cartridge labels and colorful instruction manuals cost much less per game when you’re manufacturing 100,000 of them at a time, as Jack Tramiel's Atari did. BUT - when you’re making 10 to 20 games at a time as an independent developer, glossy packaging drives the price up significantly. The developer pays more and you pay more. This is one reason why you see the new Atari charging upwards of $99 per Atari XP 2600 cartridge, and why many new homebrew and independently released cartridges cost so much to buy while the developer makes such little profit on their work.
When Atari was still in business, during the Tramiel era, Atari would regularly provide me with inside information and Atari’s sales history. Beginning in 1985, Atari would fax me their sales history numbers for video game hardware and software and continued to do so until around 1990. These faxes were HUGE. I still have them after all these years, although the faxes are now yellowed and almost impossible to read.
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"Like Jack Tramiel, independent Atari game developers and homebrewers have to weigh costs and pricing, and understand that some games sell well, some so so, and some hardly at all." - Lance |
The sales figures provided in the fax covered the product lines for Atari 2600, Atari 7800, Atari XEGS, and I think the Atari Lynx. For each Atari game, I was able to clearly see how many were manufactured and how many were sold. This gave me a big picture understanding of what things looked like at Atari, and just how big of a slice of the video game market Atari still had going into the 1990s.
People have no idea just how big a piece of the video game industry Atari still had in the late 1980s, in the midst of Nintendo dominating the market and Sega making moves. It was still a big slice of the pie, and certainly enough to make money. Between the Atari 2600, Atari 7800, Atari XE and everything else, Atari often had a bigger chuck of the video game market than Sega did with the Sega Master System.
Jack Tramiel discussing "Business is War" at Commodore and Atari
What I learned from the insider info on Atari sales figures, and through my conversations with Jack Tramiel, was that Atari had a very lean business model that “spread risk” over many games, and to publish a game with a fancy box, slick labels and docs, Atari had to order 100,000 units of a game to get good enough pricing to make a profit on a title.
But there was a problem. Not all titles sold well! Jack Tramiel wanted to get pricing down low enough for each game, so that in case one game did not sell very well, the risk would be spread around different games, so that the successful games would more than make up for any financial loss from games that did not sell.
Like Jack Tramiel, independent Atari game developers and homebrewers (both then and now) have to weigh costs and pricing, and understand that some games sell well, some so so, and some hardly at all. So you need to spread the risks out to make a profit. Do you grasp that concept? Your winners cover your losses.
So for Atari to be profitable with the XEGS, which used very good packaging in the iconic “blue tile” boxes, and to cover the cost of materials and the cartridge itself, Atari put out around 30-35 new titles for the XE. That meant to get good pricing, spread risk, and make a profit, Atari had to order over 3 million+ units of video game cartridges for the XEGS.
Take for example Necromancer, a video game for the Atari XEGS. Atari manufactured a standard order of 100,000 units of Necromancer, and ended up with around 50,000 units left because the game didn’t sell very well. On the other hand, Atari XE games like Crystal Castles, Airball and others were almost completely sold out.
The idea was to spread risk - to create different games for different genres. Don’t put all of your eggs in one basket, instead spread them around! If you create too much of the same thing - the same world, the same ideas, the same game - it may sell out or it may flop. Infinite diversity in games leads to infinite success.
This is one reason why you see some independent developers and homebrewers struggling. Some of them focus all of their time and attention, years even, developing a single game, a passion project. Often it will come in an expensive box with glossy label and colorful instructions, all put together by hand. Other developers work on multiple games at once, and work hard to keep manufacturing costs down, and passing those savings on to both the customer and to themselves.
Say what you will about Jack Tramiel, but he understood this simple concept. Atari would release a few games at a time, each in a batch of 100,000, and the successful games would cover any shortfall of the less successful games. Atari would order 100,000 games at a time - enough to keep the manufacturing cost low on slick docs, a nice box with that beautiful Atari XE blue box artwork, and a glossy label, which was something the Atari 7800 didn’t always benefit from. If the game sold well, another order of 100,000 games could be manufactured, should Atari believe there was enough excitement about the game to sell out a second batch.
A similar story was unfolding at Activision in the late 1980s. After the video game crash Activision was a much different company than it had been during the Atari 2600 boom, when Activision saw incredible success with games like Pitfall! and River Raid. Yet they survived the crash and lived to fight another day. Now Microsoft is buying them. By the time Jack Tramiel was running Atari, Activision (and their sister company Absolute) was a much leaner operation. I used to speak with the Activision guys often, and developed a pretty clear understanding of their sales history numbers for Atari systems, and how they ran their business.
Activision was smaller, and did their ordering 10,000 games at a time. To make a good enough profit, Activision and Absolute needed to sell all 10,000 units to justify a reorder of the game. The first order of 10,000 games sold would break even, and Activision/Absolute would recoup all of their money put into the development and manufacturing of the game. Then, if the game was successful, Activision would order another 10,000 units and suddenly that game would become pretty profitable! However, they told me that only one of their Atari games was able to surpass 10,000 units, which was Title Match Pro Wrestling, and that was a reason why they pulled out of the Atari market. Yet Jack Tramiel was able to sell out quite a few of their video game titles at 100,000. Even with games at the end like Alien Brigade for the Atari 7800, they were able to sell all 100,000 out, and this was with Jack not only not supporting the system properly, but competing against himself with the Atari XE.
There was a reason why so many 3rd party Atari developers released games in alternative “budget” packaging like clamshells, zip lock baggies, and even just shrink wrapped the disk and docs without a box. Because if you cannot attain the high number of sales per unit as Atari still could, you could not get the price per cartridge down low enough to be profitable. This meant finding creative ways to cut back on packaging, and just about every 3rd party company did just that. Broderbund, Adventure International, Epyx, Sierra Online, Datasoft, S.S.I., as well as many others sold games with limited “budget” packaging.
Those 3rd parties made up sales volume with budget packaging, cartridge labels and instructions, because they did not have the customer base Atari still did at that point.
The new Atari charges a lot for their line of limited run "Atari XP" games for the 2600, many of them are priced at $99. I’m betting its because they use fancy boxes, instructions and "labels". But they do not have the same Atari market that Jack had in the 1980s-1990s, thus much smaller sales volumes and the inability to order a large enough quantity to bring the price down. The Atari XP program harkens back to APX: The Atari Program Exchange and is meant as a gift to the Atari community, and not focused solely on being a profitable, but it's not likely that Atari wants to lose money either.
So when it comes to passion projects like the “Atari XP” games, the new Atari has to cover their costs and hope for a profit. To do this they have to charge a lot more for their games due to much smaller sales volumes. That’s a pretty big risk for the new Atari, and a pretty big expense that gets passed onto you, the customer.
In the 1990s, some classic video game collectors called me a liar for pointing this out, and insisted that game companies like S.S.I., Epyx, Sierra Online, Datasoft, and many other well known (and not so well known) companies never offered their games in clamshells, zip lock baggies, and other forms of budget packaging to be able to offer their software at prices people could afford.
In this blog post you will see lots of pictures I recently took of my own inventory, showing just that: actual software releases from said companies and more, in alternative budget packaging. I’ve never received an apology from those who were so quick to berate me and call me a liar for being so kind as to explain the truth. Today is their chance.
- Lance
SEE MORE PHOTOS IN MY PHOTO ALBUM:
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