Videogame Console Wars: the 70s & 80s

The history of Videogames in strewn with failed home videogame console companies. One of the strangest is Coleco. Strange in that they went so far with so little. It was like the company lived on luck.

In 1932 The Connecticut Leather Company is established by a Russian immigrant named Maurice Greenberg to distribute leather products to shoemakers.

In the late 50s they branch into injection model toys as an easy money making sideline. And then in 1968 Connecticut Leather Company buys Eagle Toys and starts using the acronym Coleco. Coleco first makes its mark in toys by marketing a home pinball games.

Big moment in time, drum roll please! 1970 Magnavox licenses Ralph Baer`s television game technology from Sanders Associates. The first home videogame console, The Odyssey, is born.

1973 the Odyssey market crumbles due to dumb marketing by Magnavox. The Odyssey is sold only in Magnavox stores, where sales people on commission create the myth that you have to have a Magnavox TV to run Odyssey so that they can make money on TV sales. The sales people are untrained and do no push the light rifle and extra game boards.

Here is were luck enters into the Coleco business plan in a major way. In 1975 General Instruments introduces $5 chip with 4 paddle and 2 shooter games burned into the chip. In short, the chip is the core of any number of videogames all for $5. Coleco is the first company to order and order heavy. They are the only company to get their full order filled as demand out strips supply to the tune of a 60% industry-wide order shortfall.

Then in 1976 the Connecticut Leather Company, now known as Coleco, releases Telstar, a television tennis game with a price of $50. They sell 1 million units before Father’s day. Lets do a little math. $5 for the chip and on the high side let us say $5 for the other components, packaging and handling for a total unit price, again on the high side, of $10 per unit for a profit of 40 million 1976 dollars. From a small company just at the edge of the toy industry to a good solid second tier toy maker in the game industry over night.

Hoping to build on their windfall Coleco release Telstar programmable console in 1977. They also hire Michael Katz from Mattel Hand Held Unit. Coleco creates and releases a sports game called Head to Head with 2 players competing head to head.

By 1982 Coleco is a major player in the home videogame market. They release Colecovision, a second generation home videogame console.

Luck as a component of the Coleco business plan plays its part again in 1982 when Xavier Roberts sells mass-production rights to Cabbage Patch Dolls to Coleco.

The great videogame crash of 1983 comes about because so many companies have jumped on the videogame bandwagon. Inferior third party games (mostly for the Atari 2600 but a fair number for Colecovision) flood the market place as failing companies or their creditors sell off stock at a loss. This diverts market dollars for more stable gaming companies undermining their cash flow and driving most out of business.

Having weathered the videogame shakeout by pure dumb luck that the management at Coleco may have thought of as good planning, Coleco begins marketing the Adam Computer in 1984.

In 1985 TSR (the makers of Dungeons and Dragons) has losses of $1.5 Million due to embezzlement and a fight for control of TSR. TSR lays off 75%. of their work force. Many leave to work with Coleco`s video game division.

After years of bungled release dates and unfulfilled promises the Adam Computer drives Coleco to file for bankruptcy in 1988.

Was Colecovision a good console? Yes, it had some of the best graphics of its day. How about the games? Not bad at all. Coleco`s luck just ran out. A company can not run on luck alone. The great Computer Platform Wars killed this company and thir console (Okay, along with some major composition from Nintendo`s NES).

In a major irony, the Adam Computer plays a small but important roll in Nindendo`s early success. Nintendo was all set to sign with Atari to release their Famicom in the North American market through Atari when a low level booth jockey at a trade show puts Donkey Kong on a display model of the Adam Computer. Coleco had the home console license for Donkey Kong but Atari had the Computer license for Donkey Kong. In my next Console Wars post I will cover how this simple action changed the face of home videogames forever.