Claim: Atari buried millions of unsold E.T. game cartridges in a New Mexico desert landfill.
Origins: In 1982, Warner Communications could honestly claim to own a goose that laid golden eggs. Its money-producing fowl was called Atari, a video game company it purchased for $28 million in 1976 which had since burgeoned into a $2 billion concern. In the early 1980s Atari owned 80% of the video game market, it accounted for 70% of Warner's operating profits, and in the fourth quarter of 1982 the Wall Street "whisper number" concerning Atari's expected
earnings predicted a 50% increase over the previous year.
The goose died at 3:04 P.M. EST on 7 December 1982, when Atari reported only a 10% to 15% increase in expected earnings, not the 50% figure so many people had been counting on. By the end of the following day Warner stock had plummeted to two-thirds of its previous value, and Warner closed out the quarter with its profits down a mind-boggling 56%. (Even worse, a minor scandal erupted when it was revealed that Atari's president and CEO had sold 5,000 shares of Warner stock a mere 23 minutes before announcing Atari's disappointing sales figures.) Atari racked up over half a billion dollars ($536 million) in losses in 1983, and by the end of 1984 Warner had sold the company.
What accounted for the sudden death of Warner's prized goose? A number of interrelated factors brought about its fatal illness:
Most of Atari's top programmers, disenchanted with the lack of respect, compensation, and freedom they were afforded under Warner management, left to work elsewhere.
Atari was selling its game consoles as cheaply as possible and expecting to make its profits from sales of game cartridges, but other companies such as Imagic and Activision (founded by some of the disenchanted Atari programmers mentioned above) cut into Atari's sales by creating their own cartridges for Atari consoles (and their games were far superior to what Atari itself was producing).
Atari's VCS game console was several years old by 1982, and its established customer base was being eroded by newer, better systems such as Mattel's Intellivision and Coleco's ColecoVision (especially when those systems started offering adapters that allowed customers to play VCS game cartridges without needing to own Atari consoles). Even worse, the "next generation" system Atari finally unveiled in late 1982 ,the Atari 5200, was a huge disappointment (in part because its joysticks were poorly designed and difficult to use, and because it was incompatible with the huge existing base of VCS cartridges).
Atari's home consumer division had garnered huge profits by producing home versions of popular arcade games created by its own coin-op division (Asteroids) or licensed from other manufacturers (Taito's Space Invaders and Namco's Pac-Man), but let the licensing of that year's smash arcade hit, Donkey Kong, slip away from them. (The license for Donkey Kong was instead snapped up by Coleco, who probably could not have successfully launched its competing ColecoVision game system without it.)
The first signs of the goose's fatal illness came with Atari's Pac-Man cartridge. Atari was so sure its home version of the world's most popular arcade game would reach new sales heights that it manufactured 12 millionPac-Man cartridges in 1982 (even though at the time only about 10 million people owned and used Atari VCS consoles), counting on the game's popularity to spur additional sales of the VCS. With most of Atari's best in-house programmers long since having fled the company, the result was a colossal disappointment. Pac-Man's animation was jerky, its moving images flickered annoyingly, and the Pac-Man character produced only a grating "bong" sound that was nothing like the arcade version's amusing sound effects. Atari did eventually sell 7.7 million copies of Pac-Man, earning almost $200 million in gross profit sales for the company, but Atari was still stuck with millions of unsold Pac-Man game cartridges, and the poor quality of the game in comparison to the arcade version seriously tarnished Atari's image among consumers. As Goldberg and Vendel noted of the Pac-Man issue in their history of the company, Atari, Inc.: Business Is Fun:
The result backfired on Atari by causing consumers to behave differently when purchasing games. There was already a growing mass of new low quality third party 'spam' titles on the market, and now with the experience of from rushing to buy Pac-Man for a premium and getting disappointed at its look, the tipping point for a new buyer environment was created. An environment where people would no longer blindly rush out to buy a newly released game, but would cautiously wait for reviews or feedback from others who'd bought the game. As a result, games purchases appeared to be curtailed in the second half of 1982, causing another new complication that sales and marketing would have to grasp and account for.
If one game cartridge could be selected as the symbol of the sudden demise of Atari's golden goose, however, it would have to be the ill-fated E.T.: The Extraterrestrial game. Steve Ross, the head of Warner Communications, made a deal with Steven Spielberg to produce a home video game version of Spielberg's blockbuster E.T. film. Basing a video game on a movie rather than an established arcade hit or a tested game premise and expecting it to sell simply because of the popularity of the film might have been a questionable enough decision on its own (although Atari did enjoy moderate success with its video game version of Spielberg's previous
blockbuster, Raiders of the Lost Ark), but on top of that Ross forked over a whopping $21 million to acquire the rights to the title, committing Atari to sell a whopping 4 million cartridges just to recoup their costs. Moreover, Ross made the deal in late July 1982 and insisted the game be ready in time for the Christmas sales season, leaving precious little time for the E.T. game to be conceived, programmed, debugged, and put into production.
The sheer awfulness of the finished product was unprecedented. Atari rushed E.T. through development in a matter of weeks to get it onto the market in time for Christmas, and the result was something many consumers found to be a virtually unplayable game with a dull plot and crummy graphics in which frustrated players spent most of their time leading the E.T. character around in circles to prevent him from falling into pits. Atari produced 5 millionE.T. cartridges, and according to Atari's then-president and CEO, "nearly all of them came back." That statement was a bit of an exaggeration, but Atari was once again stuck with millions of unsold cartridges for a game that moved far fewer units than were produced:
In total, five million copies of E.T. were produced. Initially, only 500,000 games were sold, with another million eventually joining the sales. Out of the five million E.T. carts that would ship out to distributors, a staggering three and a half million games would be returned in total, many still in the distributor boxes; the retailers hadn't even sold enough to break open additional distributor shipping boxes to require a restock. [T]here were three and a half million unsold games and in the end, the E.T. licensing deal was a complete loss for Atari.
In a bout of hubris at the end of 1981, Atari had told its distributors to place their orders for 1982 all at once. The distributors, anticipating another strong sales year, ordered aggressively, but when 1982 sales didn't meet expectations, those distributors were stuck with a lot of unsold Atari game cartridge inventory, which they returned to Atari in droves. When ordinary distributor returns were added to the millions of unsold Pac-Man cartridges and more millions of useless E.T. cartridges, Atari found itself with tons of unsellable merchandise to dispose of, which led to the rumor that Atari buried millions of E.T. cartridges in a landfill in the New Mexico desert.
There is no question that Atari dumped and buried a whole lot of stuff in Alamogordo, New Mexico, in September 1983, as the New York Times (and other sources) reported at the time:
With the video game business gone sour, some manufacturers have been dumping their excess game cartridges on the market at depressed prices.
Now Atari Inc., the leading video game manufacturer, has taken dumping one step farther.
The company has dumped 14 truckloads of discarded game cartridges and other computer equipment at the city landfill in Alamogordo, N.M. Guards kept reporters and spectators away from the area as workers poured concrete over the dumped merchandise. An Atari spokesman said the equipment came from Atari's plant in El Paso, Tex., which used to make videogame cartridges but has now been converted to recycling scrap. Atari lost $310.5 million in the second quarter, largely because of a sharp drop in video game sales.
Due to the all the bad publicity over Atari's recent negative experiences with its Pac-Man and E.T. games, when news of the company's New Mexico landfill disposal became public knowledge many people assumed that those truckloads of discarded material included nothing but millions and millions of unsold E.T. cartridges (with perhaps some of those millions of unsold Pac-Man carts thrown in as well), all shamefully and furtively buried by Atari in an attempt to keep those embarrassingly colossal failures out of sight.
Exactly what Atari buried in that New Mexico landfill remains a subject of dispute, and in recent years various sources have challenged the notion that what Atari dumped there was millions of unsold E.T. game cartridges (or other unsold game titles). According Goldberg and Vendel, the New Mexico site was actually used for disposal of a relatively small amount of unused and faulty stock and parts for cartridges, consoles, and computers from the company's El Paso plant, which was being retooled and automated to focus on the of manufacture of game consoles and home computers rather than the production of game cartridges (the latter operation being shifted to Asia). While Atari did bury some millions of units of unsold game cartridge overstock, that (unpublicized) action took place near the company's headquarters in California, not in New Mexico:
Manufacturing game cartridges had been a large part of the El Paso plant, but the new retooling left no room for them in this time of overstock ... The resulting clearance of truckloads of faulty and unused stock starting on September 22nd  resulted in anything but positive press for the company, though, as it seemed Atari just couldn't catch a break from the media. Under cover of the night, several semi-trailers convoyed out of the [El Paso] plant to drive about an hour and a half south west. They were bound for a city dump in Alamogordo, New Mexico, chosen because New Mexico had a state law forbidding scavenging of landfills. The landfill was run by Browning Ferris
Industries (BFI), who contracted with the city and was making $300-$500 a truckload from Atari, all to cover their dumped contents with garbage and dirt and then steamroll them.
[Three days later] Atari had already dumped eight truckloads when promising BFI only three a week, and still more were on the way. But that wasn't the worst of it; the public had found out. First it was the locals, who when word got out that Atari was dumping lots of cartridges, consoles and computers in their backyard, started sneaking into the dump to pilfer what they could. The hardware may have been crushed beyond use, but many of the games were still salvageable. It was when those games started showing up around town, titles like E.T., Pac-Man, Ms. Pac-Man, and Raiders of the Lost Ark, that the local media picked up on the story.
Atari had brought in a security guard to watch over the site to stop the pilfering, but it did little to stop the prying eyes of the media, and by [September 26th] the national press was all over the story. This innocent dumping, a miniscule amount when compared to the entire size of Atari's actual overstock across the country, was done as an afterthought. However, thanks to article titles like UPI's "City dump gobbles Pacman," the dumping was fast becoming a symbol of the industry's problems. [Y]ou don't pour concrete over unusable scrap, [but] that's exactly what Atari did on September 29th, which only further fueled the interest over the dumping. Around 14 truckloads had been dumped before the PR nightmare was over.
Yes, this is the very happening that gave rise to the myth of the supposed dumping of almost 3.5 millionE.T. cartridges in the Alamogordo dump. Most of the overstock of game cartridges languishing in warehouses around the U.S., comprised of a wide breadth of Atari's home titles, were indeed disposed of — that's where myth meets reality. But this occurred in a dump in Sunnyvale [California].
In May 2013 Alamogordo's City Commission approved a deal for a Canada-based film production company (Fuel Industries) to excavate the Atari landfill site and produce a documentary about the legend of the buried E.T. cartridges. As of now, that excavation is scheduled to take place on 26 April 2014 and will be open to the public:
Become a part of gamer history. Unearth the truth behind the ultimate urban legend. We're excited to announce that the excavation of the long-rumored "E.T. the Extra-Terrestrial" video game burial site will occur on April 26, 2014 and will be open to the public. Spectators are invited to watch the team uncover the infamous Atari game cartridge grave.
The Atari Corporation — faced with overwhelmingly negative response to the "E.T. the Extra-Terrestrial" video game — allegedly disposed of millions of unsold game cartridges by burying them in the small town of Alamogordo, New Mexico in 1983. Fuel Entertainment took an interest in the legend, and in December 2013, with help from local garbage contractor Joe Lewandowski, acquired the exclusive rights to excavate the Alamogordo landfill. Fuel Entertainment brought the opportunity to Xbox Entertainment Studios, and now, as part of a documentary series, the team will excavate the legendary New Mexico landfill to reveal the true story of Atari's bizarre burial.
Director Zak Penn will be documenting the dig and the events around it. In addition to fans and media, a variety of people tied to the dig, video game, and film will be in attendance — including "E.T. the Extra-Terrestrial" video game designer Howard Scott Warshaw, a team of archeologists, and representatives from Xbox Entertainment Studios. We hope you'll join us as we get to the bottom of one of gaming's biggest mysteries. A lucky handful of fans could even be interviewed for the film. See you in Alamogordo!
Whatever the answer, it seems Atari sent its goose away not with the traditional gold watch, but with a pair of cement overshoes.