Sex Drugs & Video Games: The Rise And Fall of Atari

By David Kushner

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It’s another perfect day in Los Angeles, but the real players aren’t in Hollywood or Beverly Hills. They’re downtown at the Los Angeles Convention Center for the annual Electronic Entertainment Expo, ground zero for the video game industry. More than 45,000 freaks, geeks and gazillionaires are here to check out the hottest games. Enormous screens flash with pixelated wizards and race cars. Booth babes in green Joker wigs and jet-black dominatrix boots vie for attention.

With more than $16 billion in U.S. revenue last year, video games are one of the biggest entertainment industries in the world. They have penetrated every corner of our lives, from blockbuster Xbox 360 games like Gears of War 3 in our living rooms to quirky hits like Angry Birds on our cell phones. But the most influential guy at E3 is the most elusive of all. As passersby whisper his name in awe, Nolan Bushnell heads for the desolate aisles in the back, where the start-ups are. “The edge conditions are always more interesting,” he says gingerly.

Bushnell is the godfather of video games. While modern-day dot-com whiz kids would be happy with one hit, he pulled a hat trick in the 1970s and 1980s that remains unrivaled: creating the first arcade smash (Pong), the first video game company (Atari) and the first arcade pizza chain (Chuck E. Cheese’s). “Nolan’s greatest contribution to the games industry is rather obvious. He basically started it,” says Will Wright, legendary designer of such games as The Sims and Spore.

“If there’s ever a contest to define the most important single individual in gaming history, he has the field all to himself,” says Frank O’Connor, franchise director of the hit sci-fi Halo games.

But his impact goes far beyond gaming. A 69-year-old hipster with a bushy white beard and jeans, Bushnell is the original Zuckerberg, the first 20-something prodigy to run a company in Silicon Valley and define the wildly creative start-up culture that corporations from Apple to Facebook emulate to this day. A self-made multimillionaire, he rose from a suburb in Utah to make Atari one of the fastest-growing companies in American history. It’s no wonder Leonardo DiCaprio has been in talks to portray Bushnell in an upcoming biopic.

How did one guy create a culture and an industry? You can’t understand the future of video game entertainment without knowing how it began. And as Bushnell reveals for the first time, the inside story starts in the same place he stands this day at E3: in the outer realms. “About all the interesting things happen at the edges, where the plates are rubbing together,” he says. “Not only do you get earthquakes there, but you get volcanoes. It’s the same thing with life. The closer you get to the edge, the more tremendous the opportunities.”


Clearfield, Utah is the last place you’d expect to find a future revolutionary. But Bushnell, who grew up in this working-class town near the Great Salt Lake, quickly found an edge of his own.

By sixth grade he was the town’s Napoleon Dynamite — a self-described “intellectually arrogant” six-foot-four brainiac and rebel prankster. He once faked a UFO invasion by rigging a 300-watt bulb to a kite, luring hapless cops to an alfalfa farm. After arguing down a minister over his Mormon religion, “I became a heathen,” he says, “and never looked back.”

And he discovered a whole new reason to look forward. While studying electrical engineering at the University of Utah in the early 1960s, Bushnell wandered into the department lab one day to find everyone huddled around Spacewar!, the first game ever created on a minicomputer. It was graphically crude but remarkably compelling. As Bushnell maneuvered his little spaceship around a black hole while firing bullets at his opponent, the future flashed in his mind. For many summers he had been managing the old-fashioned midway games — such as Skee-Ball and ringtoss — at nearby Lagoon Amusement Park, and he knew people would go crazy for something like this. “I said, ‘If I had this in my amusement park, I’d make a lot of money,’ ” he recalls. “It was magic.”

The magic, however, didn’t seem possible to achieve. Computers were too expensive to mass produce for an arcade game, and Bushnell had a more pressing matter to worry about: getting a real job. But shortly after the 25-year-old fledgling engineer found employment at an audio-video company in California, he got the Spacewar! bug again. Living in the nascent Silicon Valley, Bushnell began palling around with eccentric artificial-intelligence programmers and woolly DIY geeks, and he soon began talking up his idea.

Bushnell realized he didn’t need an expensive computer to make a game at all. A buddy named Ted Dabney, who had studied electronics in the U.S. Marine Corps, had found a way to manipulate a television signal using a video board so that an ordinary TV screen could display a series of squiggles and dots — just what Bushnell needed to make a coin-op version of Spacewar!, which he called Computer Space. As he and his crew worked on the hardware, Bushnell knew he had to do more than make a game; he had to make it sexy enough to lure people over to play it. He sculpted something that seemed right out of Barbarella — a tall, sloping cabinet with a screen facing out the top. Shaped like a coffin standing on end, it set the standard for arcade games to come. When it was finished, he amped up the sex appeal, taking out ads featuring a comely model in a negligee posing seductively next to the machine.

In 1971 Bushnell released Computer Space, the world’s first commercially sold arcade video game. Unfortunately for Bushnell, it was too odd and complicated to become more than an overlooked novelty. Still in his 20s, he set about creating his next game. That’s when he launched his own company, Atari, along with business partner Ted Dabney.

After seeing a demo of a rudimentary tennis game on a home video system called the Odyssey at a trade show, Bushnell decided to have his new engineer, Al Alcorn, a self-described “anarchist from Berkeley,” experiment with a tennis game of their own. They called it Pong. To make it accessible, Bushnell kept the rules as simple as possible. avoid missing ball for high score, he wrote on the machine. “Those instructions were kind of a joke,” he says with a laugh. “You couldn’t play the game without that as a given.”

To test the product, they set it up in a Silicon Valley dive bar called Andy Capp’s, charging 25 cents a play. Soon after, Bushnell got an angry call from the owner, telling him the machine was already broken. Bushnell dispatched Alcorn to check out the damage. When the engineer arrived and opened the cabinet, shiny coins spilled from the machine. Quarters had clogged the coin box and stopped the game from working.

Pong quickly became a hit. “It was an otherworldly success,” Bushnell says.


Drive through the hills between San Francisco and San Jose today, and you’ll find the streets dotted with familiar empires: Electronic Arts, Zynga, Sony Computer Entertainment America. Inside, the floors of tchotchke-lined cubicles teem with scruffy young gamers in jeans and hoodies — the default dot-com uniform. With the area’s steady stream of newly minted millionaires (and billionaires) under the age of 30, they have reason to dream big. But they wouldn’t be dreaming at all if it hadn’t been for the geeks at the company that created this unique high-roller lifestyle in the first place: Atari.

When Bushnell arrived in the early 1970s, Silicon Valley was still dominated by the Orwellian group-think culture practiced by IBM and its ilk. “In those days, nobody in their 20s was a CEO,” he recalls, “and every engineer in the Valley wore a white shirt and tie.” But with orders pouring in for Pong, Bushnell set about changing that for good. In addition to launching the modern game industry, Atari pioneered something just as influential: the creative company culture that pervades the Valley to this day. “We said, ‘The heck with it,’ ” Alcorn recalls. “ ‘We’ll excel at what we do — not how we look.’ ”

With only four employees and 500 Pong machines to build, Bushnell had to staff up fast or risk losing the deals and blowing his early success. Young and aggressive, he didn’t want to wait four days to run a help-wanted ad, so he trudged down to the local unemployment office instead. There he found a room full of hippies and homeless people and trucked them back to his production plant. “What I didn’t have them do is pee in a bottle,” Bushnell says, “which is what I should have done.”

Every day they churned out 10 Pong machines, each of which cost $300 to make and sold for $900—a huge markup at the time. They also had placed some of their own machines around town. To collect the coins from sketchy bars, Bushnell’s workers began carrying hatchets in their cars, just in case. Before long, needing more production space and room for more employees, they moved the commune to an old roller-skating rink nearby. As pot smoke filled the air and hippies skated between arcade machines, Atari became an extension of the Haight-Ashbury scene up the road. “I wanted this company to be a perfect meritocracy,” he says. “I wanted everyone to create and do wonderful things.”

Bushnell looked out on his bearded and bell-bottomed crew and told them, “I don’t care when you come to work. I don’t care if you come to work. I don’t care what you wear. I don’t care if you bring your dog. I don’t care if you bring a six-pack. Get your job done. You’re an adult, and I treat you like an adult.”

With Pong machines flying out the door and new games in development, Atari resembled the Valley’s answer to Willy Wonka’s factory, and Bushnell effusively embodied the lead role. Dressed in jeans and a bow tie and puffing on his (tobacco) pipe, he nurtured a work environment that was as fun as the games. To motivate his staff, he promised to tap a keg on the back dock each Friday when they hit their quota of machines. The beer-for-Pong promise worked, and Atari’s keggers became the stuff of Valley legend. “We got a reputation as being the party company,” Bushnell recalls.

Bushnell installed a vintage 1850s beer tap in his office and invited anyone who wanted to join him to drink and play dice after work. The party atmosphere spread across the Valley. “That was part of the culture, smoking pot and doing a lot of cocaine,” Alcorn says. “Our attitude was work hard and play hard.” But despite his carnivalesque flair, Bushnell didn’t treat his business as just fun and games. “I always felt as though I was an ex-Mormon dressed up like a hippie,” he says. “I felt I was a poseur. I was an engineer and a geek. What was more interesting to me was the technology and the creativity.”

Before long he would need all the creativity he could muster.

Atari was going broke.


By 1974, Pong machines were popping up around the world, but they weren’t Atari’s. During his rapid rise, Bushnell had neglected to copyright Pong’s circuit boards, enabling other companies to rip off his design. “I was young and dumb,” he says. Of all the Pongs being sold, only 25 percent of the machines were made by Atari. An ill-fated plan to produce Pong machines in Japan brought Atari even closer to bankruptcy.

The financial pressures began taking a toll on the utopian company life. The festive atmosphere suddenly turned dark, and Bushnell felt himself sinking into despair. Line workers complained of low wages and showed up wearing shirts that read fuck you. His stress turned into anger, and Bushnell wielded his ax as readily as he tapped a keg. “People who needed negative motivation, I would fire,” he says. “I was insufferable.” One colleague would later describe Bushnell as having “the attention span of a golden retriever.” The pressure was also affecting his personal life at home with his wife and two young daughters. “The stress of business is difficult for a marriage,” he says. The couple would soon divorce.

With Atari on the brink, Bushnell had to dig himself out of his hole fast. He hatched a business philosophy that became his guiding principle: the meta-game. Knowing Atari’s hardware was being copied by competitors, Bushnell began to, as he says, “build in booby traps.” It was the equivalent of printing a recipe with the wrong ingredients. Atari purposely mismarked chips so that when other companies tried to re-create the designs, their machines wouldn’t function. The ploy worked, and Bushnell soon regained market share. “The whole success of Atari was really because of creativity,” he says.

To inspire creativity, Bushnell began holding raucous beachside retreats and company meetings in the hot tub behind his hillside home. The San Francisco Chronicle ran a profile of Bushnell along with a photo of him soaking in his tub with an attractive — and seemingly topless — woman. “It was a wild environment,” he recalls wistfully. “It was post–flower revolution, women’s liberation, no AIDS yet and lots of company romances.” The engineers began code-naming their projects after women — including Darlene, a beloved employee who, according to Bushnell, “was stacked and had the tiniest waist.”

“Darlene” was the project name for Atari’s breakthrough home version of Pong for TV sets. While the Magnavox Odyssey was the first home console, Pong got a huge boost from a giant distribution deal with Sears, the great American department store chain. The pairing of Sears and Atari perfectly symbolized the transition from the old titans to the next generation of start-ups burgeoning in Silicon Valley.

Bushnell showed up for his first meeting wearing his usual jeans and shirt, only to find the Sears executives in suits and ties. For the next meeting, Bushnell showed up in a suit and tie, but the Sears guys were awkwardly dressed down in jeans. During a visit by Sears representatives to Atari’s production plant, the teams broke the ice by riding around the conveyor belts in cardboard boxes.

The unlikely but dynamic pairing paid off. The home version of Pong became a runaway smash. By the end of the holidays in 1975, Atari topped more than $40 million in sales. That success didn’t come without a price. Bushnell split with his original partner, Ted Dabney. (“His ego was blowing out of proportion,” Dabney later said about Bushnell. “He started doing really stupid things.”) Ralph Baer, creator of the Odyssey, sued Atari for allegedly stealing the idea for Pong. Atari settled out of court, with Bushnell maintaining that he had merely improved on a poorly executed idea. “I absolutely did see the Odyssey game,” he said, “and I didn’t think it was very clever.”

Baer, now 90, is still bitter. Reached at his home in New Hampshire, he says of Bushnell that “whenever he’s confronted with reality he takes off into some never-never land of imagined sequences that were drilled into his head by his lawyers. They never leave his cranium no matter how many times you quietly and politely explain the error.”

With the lawsuit behind him, Bushnell wasn’t dominating just the new home video game market—he was ruling arcades. Building on the success of Pong, Atari cranked out such hits as Tank, Indy 800 and Shark Jaws, based on Steven Spielberg’s hit film. To build a single-player brick-breaking game called Breakout, Bushnell tapped a gifted young hippie on his team, Steve Jobs.

Just 20 years old at the time, Jobs had been dropping acid, fasting, studying Eastern mysticism and working as a phone phreaker, manipulating phone systems to make free long-distance calls (including prank calls to the Vatican). Impressed by Jobs’s out-of-the-box thinking, Bushnell made him a technician. Bushnell offered him a bonus if he could use as few of the costly computer chips as possible when making Breakout. Jobs hit up a friend at Hewlett-Packard, Steve Wozniak, to help him with the machine.

“Atari was getting all kinds of attention by then for having started the video game revolution with games like Pong,” Wozniak later recalled. “Bushnell, well, he was just larger than life. Steve said it was a blast to work for him.” Three months later (or four days, by Wozniak’s account), the two Steves completed the game, which quickly became one of Atari’s most successful hits, a classic. Then Jobs went to Bushnell with a breakout offer of his own: to invest in the personal computer company he and Wozniak were starting.

For $50,000, Jobs said, Bushnell could own one third of Apple. Bushnell, however, was so busy with his own success (in addition to launching a series of Atari computers) that he passed. “Like an idiot I basically turned it down for the right reason,” he recalls. But as Apple exploded, Bushnell saw the creative business approach he had nurtured at Atari go wider in the Valley. “Jobs and Wozniak carried that corporate culture to Apple,” he says. “That’s when the ties came off.”


In 1976, another hot tub meeting at Bushnell’s spawned Atari’s ultimate conquest — the home video game that would pave the way for the consoles that dominate our living rooms today. Code-named Stella, the Atari Video Computer System became better known as the Atari 2600. By exploiting innovations in chip technology, Atari could create an interchangeable console that, unlike home Pong, could run a variety of games on cartridges.

To pull this off, the 33-year-old Bushnell needed more money to cover the cost of production. With an ego to match his creativity, he wasn’t satisfied merely to have launched the video game business. He wanted to rule its future before the chance slipped away. “I had a huge opportunity to dominate an industry, and if I didn’t fulfill the destiny of the video game business, then somebody else would,” he says.

He knew exactly what he needed to do: sell.

With video games taking over a new generation, Warner Communications, the parent company of the movie and music behemoths, wanted to cash in. The corporation sent a private jet to pick up Bushnell and his team and bring them to New York City for a meeting. When Bushnell and his band of hippie geniuses climbed onboard, they saw a familiar face in the corner — Clint Eastwood, whom Warner was flying to New York with his girlfriend for a premiere. Kicking back in the jet alongside the Hollywood superstar, Bushnell thought, I can get used to this.

Warner put the gamers up on the top floor of the Waldorf-Astoria with a pool table and a grand piano and brought them along with Eastwood to see the film. This time Bushnell wore a suit to the meeting. The execs told him, “We think this is wonderful, and we want you to be the architect of the technology future at Warner.” Four years earlier, Bushnell had launched his video game start-up. Now, in 1976, he was selling the company for $28 million.

Bushnell remained Atari’s chairman and pocketed an estimated $15 million on the deal. He treated himself to a new home: a mansion formerly owned by the family behind the Folger Coffee Company. His moving in symbolized in many ways the arrival of a new generation of American moguls, the computer geeks who could build an empire on a chip and a dream. He also had his own private jet and a yacht named Pong.

The Atari 2600 defined a generation upon its release in October 1977, but it was the beginning of the end for Bushnell at Atari. A serial entrepreneur, he had other plans in the works: a pioneering online game network and a chain of family-friendly pizza arcades. Warner was pouring all its resources into the 2600 — despite Bushnell’s insistence that it was in danger of oversaturating the market. The battle grew epic and ugly, as Bushnell believed the baby he had nurtured for so long was being dangerously mismanaged. Ultimately Warner won, and King Pong was out. “In my brain at the time, I thought I’d quit,” Bushnell says. “They thought they fired me. I’m not sure.”

Free from Warner, Bushnell grew his next empire, Chuck E. Cheese’s Pizza Time Theatre, the pioneering restaurant chain — complete with life-size robotic singing animals. Suddenly, all the kids who had grown up on Atari games had a place to hang out, scarf pizza and beat the high score on the latest Atari games such as Asteroids and Centipede. In less than a decade, the video game industry had reached its golden age. By 1982 Atari was bringing in $2 billion a year. Bushnell’s oddball start-up had become one of the fastest-growing companies in American history. He had spawned not just a new industry but an entire generation of gamers — an impressive legacy.


“Hey, Nolan!” says a young guy with a strawberry-colored Mohawk. “When are we going to make those robots?”

It’s another bright blue day in Los Angeles. Bushnell and I are having lunch in a funky warehouse neighborhood downtown, where this local artist is eager to start a new project with the Pong master. Bushnell perks up as they talk about the cool new gizmos they want to build. It’s moments like this that still inspire him more than anything — even more than the possibility of being portrayed by DiCaprio in a movie. “I may be bizarre, but I don’t particularly revel in the provenance aspect,” he tells me as he digs into a barbecued-pork sandwich. “I’m much more interested in stuff I’m working on.”

Although he remains best known for his work in video games, Bushnell has made millions with a host of high-tech companies since leaving Atari. Always innovating, he created one of Silicon Valley’s earliest incubators, Catalyst Technologies, which gave rise to little-known but highly successful start-ups such as Axlon (an electronic-toy company, later sold to Hasbro) and Etak (a pioneer in automotive-navigation systems that became the precursor to Google Maps and MapQuest).

“What’s really striking about Nolan’s career is how many different areas he’s had a profound impact on,” says Will Wright. “His work has significantly contributed to not just the gaming industry but also restaurants, location-based entertainment, toy design, education and even mapping systems. I can think of few people who have had such a broad influence on so many different commercial fields.”

Not every venture has been a success, and Bushnell has had his share of hard times. In 2010 his company uWink, a sort of adult version of Chuck E. Cheese’s, shut down its last restaurant after failing to take hold. “When you’re out on the edge, sometimes you don’t know where the edge is and you step over and fall into the Grand Canyon,” he says. “But the next time you’re at the Grand Canyon, you know where the edge is. Everything is about learning. There’s always something you learn that arms you more strongly for your next attempt.”

These days, his next venture is his ultimate: creating a new kind of school that uses the innovations and creativity of new technologies to empower kids. He calls the school Speed to Learn and says it will be built on the idea that “software should teach, and teachers should mentor.” His plan is to open the first Speed to Learn as a private school in Los Angeles and expand from there. He eagerly shows me the new logo he’s designed — a yellow smiley face with the eyes replaced by fast-forward icons. “I think of new technology as presenting me with a new sandbox,” he says. “I love the process of innovation.”

Innovation runs in the family. Nearby, his son Brent (one of his eight kids from two marriages) has his own game-development company in the works. Brent says games are part of the Bushnell DNA; he recalls pulling his dad away from his cell phone games in restaurants. “He’s just a big kid,” Brent says.

Indeed. After a game of Pong on my iPhone (I won), Bushnell tells me how he road-trips to the Burning Man festival every August. “I love the creativity of the place,” he says. He’s also working on his first science-fiction novel, which explores what he thinks is the inevitable singularity of computer intelligence surpassing that of human beings. In the meantime, he’s always dreaming up something new.

“My feeling is that for creativity and innovation you always have to take the blinders off,” he says. He gives an example: “If you ask how you can innovate professional football, most people would say, ‘Design new plays; design new uniforms.’ But if you really want to look at it, you have to say, ‘What can I do differently in the parking lot?’ You have to expand your horizons rather than focusing on the field. You have to focus on what’s happening in the grandstands and the parking lot.” Bushnell smiles wide. “That’s the meta-game.”

And as always, he’s ready to play.


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