Claim: Atari buried millions of unsold "E.T." 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 Pacman), 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 Pacman 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 millionPacman 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 an colossal disappointment. Pacman's animation was jerky, its moving images flickered annoyingly, and the Pacman character produced only a grating "bong" sound that was nothing like the arcade version's amusing sound effects. Atari sold 7 million copies of Pacman, but the poor quality of the game turned many people off, and Atari was still stuck with 5 million unsold game cartridges.
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 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) was a questionable enough decision, but the sheer awfulness of the finished product was unprecedented. Atari rushed E.T. through development in a matter of months to get it onto the market in time for Christmas, and the result was 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."
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 distributor returns were added to the 5 million unsold Pacman cartridges and another 5 million 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.
In this case the rumor was accurate, although it wasn't the first time Atari had destroyed cartridges, nor was E.T. the only game dumped in New Mexico. (Rumor had it that Atari's Borregas Street warehouse sat atop crushed and buried game cartridges as well.) Some other video game manufacturers attempted to rid themselves of excess inventory by selling it at sharply reduced prices, but Atari, stuck with millions of games and consoles that were largely unsellable at any price, sent fourteen truckloads of merchandise from their plant in El Paso, Texas, to be dumped in a city landfill in Alamogordo, New Mexico in late September 1983. In order to keep the site from being looted, steamrollers crushed and flattened the games, and a concrete slab was poured over the remains.
Atari sent its goose away not with the traditional gold watch, but with a pair of cement overshoes.