Computer Space was the world’s first commercially sold coin-operated video game. Galaxy Game, offering essentially the same experience, was never commercially sold, appearing only at Stanford University. Computer Space played a version of the massively influential Spacewar but was deemed a failure by its designer, Nolan Bushnell, because "it was a little too complicated for the guy with the beer in the bar."
In 1972, Bushnell created Atari. The company’s first project was ostensibly a warm up project to get programmer Alan Alcorn used to working with video games. It was profoundly simple. Two paddles (divided into subsections allowing a player to change the ball’s angle of return), a ball (whose speed increased with every rally) and an inconsequential line symbolizing but not acting as a net were all the parts required to create the world’s first blockbuster video game: Pong.
Pong’s success was immediate. At a local bar, the first machine malfunctioned a week and a half after it was installed due to an overflow of quarters. Pong spread throughout the country as a pay-to-play machine. Magnavox’s Ralph Baer took Atari to court for essentially cloning his game. Baer won a settlement but all sources point to the payout (a one time licensing fee of $700,000 according to Replay by Tristan Donovan) being minuscule in the face of Atari’s dramatic growth into a multi billion dollar business shortly thereafter. On top of that, the settlement stipulated that Atari then held exclusive rights to the game. Bushnell had completed a coup.
Pong’s popularity exploded. As it swept the nation in bars and other public spaces, Atari machines accounted for only a fraction of all Pong machines (various sources report between 10% and 30%). For want of skilled labor, Atari could not keep up with growing demand or stop competitors from releasing clones. They found themselves raiding local unemployment offices and hiring everyone in sight, paying unskilled laborers almost minimum wage. Upper management and the rank and file alike became notorious for the company’s disorganized atmosphere complete with drug use, constant parties and theft.
Many companies, most notably Apple and Nintendo, would in the future simply make clones of the game and take a piece of the fast growing video game pie for themselves over the next decade. After Atari’s success, Magnavox fought vigorously in court against many of the companies producing knock-offs. The Odyssey had its best year ever as Pong’s success spread.
As Atari seemed incapable of producing enough machines to fulfill demand and had no interest in numerous lengthy and less than certain legal battles, Bushnell and Atari instead created a new market. "We tried to be fast and out-innovate the competition," said Bushnell in The Ultimate History of Video Games.
The console version, Home Pong, was built and distributed in 1975. Marketed and priced brilliantly, it is essentially wholly responsible for the home console market that survives and thrives to this day. While it took the Magnavox Odyssey years to sell 100,000 units, Home Pong sold 150,000 units in a single season according to The Ultimate History of Video Games.
Pong is almost solely responsible for introducing America to video games, to the idea of playing and directly competing via games on a screen. It is an incredibly simple game, very probably ripped right from Magnavox’s Tennis game released only months prior, but Bushnell’s prowess allowed his creation, his company and his empire to succeed where others had failed.
Arcades and consoles alike can trace their ancestry right back to Pong. Truth be told, the entire video game industry owes the ugly little box called Home Pong a debt of gratitude. The simple but infectious game was where it all took off. It was the beginning of an era.