On November 29, 1972, a new company, Atari (a Japanese word with a meaning similar to the term “check” as used in chess), formed by Nolan Bushnell and Ted Dabney released a “video arcade game” – Pong.
It was essentially a game of ping-pong played on a television set. It was not the first video game: in 1971 Bushnell had developed a video arcade game called “Computer Space”, which he realized, had been too complicated – Bushnell was not about to repeat that mistake. There was also another table tennis game which had been developed and patented by Magnavox – the Magnavox Odyssey. Bushnell would eventually face a patent infringement suit from Magnavox, and settle out of court for $700,000 and an agreement to license the Magnavox patents – and which the huge profits from Pong made it no problem for Bushnell to pay.
The key to Pong were its novelty, and its simplicity. At a quarter a go, it was immensely profitable for the manufacturers – and for the bars and arcades where the video game was placed. By March of 1973, less than six months after Pong’s release, somewhere between 8,000 and 10,000 units of this coin-operated video arcade game had been sold by Atari – manufactured by Bushnell in a make-shift converted roller rink.
You would think that the success of Pong – the most popular arcade game of all time – would have suggested an easy road ahead. But when Bushnell demonstrated a console version of Pong at the 1975 CES (Consumer Electronics Show), most major retailers were not interested – believing that there was little public interest in home video games. This was right around the time George Lucas was trying to convince someone in Hollywood to produce Star Wars. Sears Roebuck eventually contacted Bushnell, asked how many Atari could produce for Christmas, doubled that number, and saw customers lining up to get one. (And 20th Century Fox eventually decided to produce Star Wars).