Legal Opinion: How lawyers built the games industry, and why this is important


By on May 1, 2014 at 10:16 am

James’ article earlier this week about the problems with Steam and quality control brought back memories of the Video Games Crash of 1983. Well, whatever repressed memories I have are probably pooping in a crib, but the internet helps me imagine: An overconfident Atari abandoned quality control, leading to the refusal of gamers to purchase such buggy delights as E.T. the Extra Terrestrial and a really shoddy Pac-Man port. The result: A total crash of the console gaming market, allowing PCs to take their rightful, leading place (for a while).

Okay, so it wasn’t a bad outcome at all. I dunno why everyone talks ill of it. But the crash did highlight one other thing: That much of the gaming industry was built by lawyers. Today we’ll look at how, so you’ll be able to answer the question of “How the games industry grew up”. It might arise on a date.

Moral rights started it all

In the heyday of the late 70s, Atari executives in powder blue suits demanded their coders be anonymous. Endgame credits didn’t exist, and developers even had to change their names for press interviews. This was, apparently, for their own good, in much the same way as A Current Affair pixelates those on witness protection. Many Atari 2600 games were really bad, after all.

Arguably, the real purpose of this was to maintain Atari’s dominant market position, by keeping talented coders anonymous in the hopes that they would not be poached by competitors. It was also cost cutting: Pay a developer $20,000 a year, get $2 million in sales from the game they designed by themselves. Woot.

This understandably rankled with developers, since film and music published by the same parent company (Warner) allowed creative workers their moral rights that exist alongside copyright: The rights to be identified in credits and build a portfolio. And so Activision was formed, by four of those pissed-off developers.

In these days, Activision was not known for milking every franchise to the ground. Rather, Activision was the most important innovator of the early 80s. Activision marketed its developers just as it marketed its games, and pioneered the concept of third party studios operating outside the hardware manufacturers.

Unfortunately, because Atari had no copyright protection or DRM of any kind in its console, this also resulted in everyone and their dog creating poor quality games for the Atari 2600, crashing consumer and retailer confidence in the industry.

The dog food company game typical of the shovelware that caused the crash. Send in coupons from dog food cans and you got… this.

Blame Pong for everything

The crash forced Activision to survive on cash reserves for a time. Although producing high quality games like Pitfall, Activision suffered the one-two hit of lack of consumer trust on the right, and bargain discounting of shovelware games flooding whatever market was left.

Activision limped along, now focusing on the still-thriving PC market, but things took a turn for the worst when the studio was successfully sued by Magnavox, owner of the patent for Pong. The effort was funny given the Pong genre was just about to collapse, but the patent was a big deal for Magnavox at the time, which had a 40 million a year income stream for ball and paddle game licensing fees.

The lawsuit exhausted whatever cash reserves Activision had left, and by 1990 the only hope for survival was a takeover by an investment group owned by none other than Bobby Kotick. Bobby turned the company around, but as a businessman, not a developer, and the new Activision ran very differently to its innovating youth. Fast forward a couple of decades and we have Guitar Hero, a rather Pong-like game in itself (it’s played with a paddle).

The demise of Activision.

Nintendo’s new strategy: limited licensing

At the time of the crash, Nintendo was enjoying success with the NES in Japan. The crash was a strictly American phenomenon: Nintendo had always kept tight quality control.

Nintendo wanted to expand into the American market, but was anxious to avoid the fate that befell Atari. Nintendo’s answer was to drastically limit the licenses it extended to third party developers. Anyone who didn’t abide by Nintendo’s terms was denied the NES developer kit, and any developer who tried to reverse engineer could be sued on breach of copyright.

This worked, for a time. Nintendo’s excellent Mario established the gold “Seal of Quality” you could see on NES packaging. Consumer confidence was restored, and so ushered in the era of the NES, Master System, SNES, and Megadrive. This was the golden age of consoles. Instead of today’s copycat ports, 8-bit and 16-bit consoles were known for their exclusive and innovative flagship titles.

However, the golden age couldn’t last. The new competitors of Sony and Microsoft came into the market, luring the best developers with promises of more creative freedom, and less severe licensing. Although Sony and Microsoft retained some control, developers weren’t restricted to just one platform, could release more than a few titles per year, and didn’t have to answer to strict Japanese businessmen who yelled at them a lot.

We see the result of this licensing tussle today: Many titles are developed for both the Xbox and Playstation, and in some cases PCs too. Instead of the segregated markets of the past, now we just have the games industry.

Will the future be driven by gamers or publishers?

Some comments on James’ article suggest Kickstarter and Steam Greenlight serve as a lifeline to an industry stagnating from publisher control. Admittedly, publisher control has reached ridiculous levels in the past with overreaching DRM, and so for a time this was a welcome backlash.

However, viewed in the historical context, it’s really just history repeating. While I’m doubtful that we’re going to have another video game crash any time soon, I have full confidence that publishers will stay firmly in control, just as they took control after the last glut of shovelware that entered the market.

It might take a couple of years, but publishers will respond to any reduction in profits by tightening their grip, not allow creative freedom to go unchecked. This is why we can’t just let backyard developers have free reign on premier publishing platforms like Steam.

Never underestimate the power of companies and their lawyers to control the industry. We’re plotting against you.  

15 comments (Leave your own)

Interesting potted history Pat. Always enjoy your yarns.


great article. Should go more in-depth in some areas, would be very interesting reading


Speaking of E.T., did anyone read the articles on how they’ve found the fabled landfill site containing millions of dumped E.T. cartridges?

Patrick Vuleta

Yes, one of the events that inspired me to write this article – was on my mind.

So apparently they weren’t all crushed after all.


80s video gaming history always makes an interesting read.


Heh, was there a video games of equivalent of Jordan “Wolf of Wall Street” Belfort during the 80′s?



Yes I saw it as well, including video of the dig in the article I was reading. I suggested it for news here, but it was seemingly not deemed news worthy despite previous articles mentioning it (probably because hasn’t done a story on it yet for them to copy from)


However, viewed in the historical context, it’s really just history repeating.

Nearly, there are similar themes but there are significant differences.

Its now possible to find out information on even the most obscure game before purchase, rather than relying on a box cover and some magazine articles. There have always been crap games, people now have the tools to filter them out.

Kickstarter is a whole different ballgame and nothing like that model existed in the 80s,

You are completely correct about the power of large companies to manipulate there market however.

Patrick Vuleta

In part I agree, and that was why I wrote that we won’t be seeing another crash.

Tools will always evolve with technology but I believe video games will constantly yo yo between various degrees of publisher control and gamer input.

Like James, I don’t think “buyer beware” is a good enough solution for Steam. Simply letting anyone have access to what’s meant to be the premier platform dilutes the value of that platform, and will just lead to a backlash from the publishers if they find their games swamped by low quality budget titles.

There can exist a market where we have different stores offering different quality levels. I don’t think Steam should attempt to be carrying the entire market.


The patent system is stupid and lawyers are needless.

James Pinnell

Great piece Patrick. The great video game crash shares a lot with the current state of the market – and while there are some differences, a focus on quantity over quality is a significant concern when the long term health of the industry is the endgame.


The patent system is stupid and lawyers are needless.

ignorance writ large.


ivantsr: ignorance writ large.

Written in standard forum font size actually.

Please tell me more about how Lawyers don’t exist purely to exploit broken systems for their own personal gain. While your at it you can feel free to try and demonstrate how patent trolling isn’t a thing and how the patent system doesn’t severely stifle innovation, also you can explain to me how patenting things like a page turn is totally legitimate necessary and reasonable.


Lawyers may have built the games industry but they can very well end up destroying it if they’re not careful.


spooler: 1. Please tell me more about how Lawyers don’t exist purely to exploit broken systems for their own personal gain.

2. While your at it you can feel free to try and demonstrate how patent trolling isn’t a thing and how the patent system doesn’t severely stifle innovation, also you can explain to me how patenting things like a page turn is totally legitimate necessary and reasonable.

I’ve broken your quote up for clarity’s sake.

1. Lawyers have existed in every society ever. People have disputes over law/social process and need people who are professionals at navigating through it all to assist.

Of course some lawyers are self serving tools which over complicate things which are otherwise difficult enough already. They are people. The alternative to having courts, lawyers and legal system is one I suspect you’d like less.

2. Patent trolling is definitely a thing. Patents are also definitely needed to protect legitimate IP – otherwise creativity is literally worthless. It has no securable tradable worth. Without that it doesn’t get invested in and then realised in actuality.

Of course the system could be better and patents on such minutiae seem to stifle basic forms of creativity which it seems we’d be better off having within the creative commons due to their social utility. However if someone creates a novel page turn which they can have manufactured and sold, shouldn’t their be some method for that person to protect their intellectual property so they can make money off it?

I think you need to justify your complaints rather than the reverse.

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