In the late ‘70s and early ‘80s, Atari was a giant in the entertainment world. It helped kickstart the video game industry with a combination of high-profile games and inventive hardware that invaded local bars as well as the living room. Atari became a cultural icon and one of America’s rising industrial stars. But it didn’t get there alone. As the first third-party developer, Activision was one of Atari’s biggest supporters, producing some of the most successful and best-loved games for the ­Atari 2600. Many credit Activision with bolstering Atari hardware sales and helping sustain the console maker’s branding. Atari didn’t see it that way. To Atari, Activision was the worst kind of enemy: an enemy that had come from within.

This story first appeared in issue 239 of Game Informer

The Memo that Sparked a Fire
In early 1979, Atari’s marketing department issued a memo to its programing staff that listed all the games Atari had sold the previous year. The list detailed the percentage of sales each game had contributed to the company’s overall profits. The purpose of the memo was to show the design team what kinds of games were selling and to inspire them to create more titles of a similar breed. Unfortunately, a few of Atari’s designers were less ­than ­inspired.

David Crane, Larry Kaplan, Alan Miller, and Bob Whitehead were four of Atari’s superstar programmers. Collectively, the group had been responsible for producing many of Atari’s most critical hits. Titles like Canyon Bomber and Surround don’t sound like much today, but over 30 years ago they were hot properties. The four programmers also respected each other’s work, and had formed a clique within the company.

“I remember looking at that memo with those other guys,” recalls Crane, “and we realized that we had been responsible for 60 percent of Atari’s sales in the previous year – the four of us. There were 35 people in the department, but the four of us were responsible for 60 percent of the sales. Then we found another announcement that [Atari] had done $100 million in cartridge sales the previous year, so that 60 percent translated into ­$60 ­million.”

These four men may have produced $60 million in profit, but they were only making about $22,000 a year. To them, the numbers seemed astronomically disproportionate. Part of the problem was that when the video game industry was founded, it had molded itself after the toy industry, where a designer was paid a fixed salary and everything that designer produced was wholly owned by the company. Crane, Kaplan, Miller, and Whitehead thought the video game industry should function more like the book, music, or film industries, where the creative talent behind a project got a larger share of the profits based on its success.

The four walked into the office of Atari CEO Ray Kassar and laid out their argument for programmer royalties. Atari was making a lot of money, but those without a corner office weren’t getting to share the wealth. Kassar – who had been installed as Atari’s CEO by parent company Warner Communications – felt obligated to keep production costs as low as possible. Warner was a massive c­orporation and everyone helped contribute to the ­company’s ­success.

“He told us, ‘You’re no more important to those projects than the person on the assembly line who put them together. Without them, your games wouldn’t have sold anything,’” Crane remembers. “He was trying to create this corporate line that it was all of us working together that make games happen. But these were creative works, these were authorships, and he didn’t ­get ­it.”

“Kassar called us towel designers,” Kaplan told InfoWorld magazine back in 1983, “He said, ‘I’ve dealt with your kind before. You’re a dime a dozen. You’re not unique. Anybody can do ­a ­cartridge.’”

The four programmers left Kassar’s office dejected. Warner was willing to give its recording artists royalties for the music they made, but their most productive programmers couldn’t even get a bonus after making the company millions. Crane, Kaplan, Miller, and Whitehead were good at making games – that in-house memo proved people wanted to play what they programmed. The four decided that they were done working for Atari. But they weren’t done making games for ­the ­Atari.