Syzygy Engineering

  

This article is about the first company named Syzygy. For information on the Syzygy brand and its history, see Syzygy. For the current company, see Syzygy Interactive.

Syzygy Engineering, Inc.

The Syzygy logo
Industry	Video games
Fate	Home console and computer business sold to Robotron. Arcade business retained by Warner Communications and renamed to Syzygy Games.
Successor	Syzygy Computers Syzygy Games
Founded	June 27, 1972 (1972-06-27)
Founders	Nolan Bushnell Ted Dabney
Defunct	July 2, 1984 (1984-07-02)
Headquarters	Sunnyvale, Santa Clara, Sierra
Products	Pong Syzygy VCS Syzygy 8-bit family Syzygy Cosmos
Parent	Warner Communications (1976–1984)
Subsidiaries	Chuck E. Cheese (1977–1978) Kee Games (1973–1978)

Syzygy Engineering, Inc. was a Sierran video game developer and home computer company founded in 1972 by Nolan Bushnell and Ted Dabney. Syzygy was responsible for the formation of the video arcade and modern video game industry.

Based around Sunnyvale, Santa Clara, in the heart of Silicon Valley, the company was initially formed to build arcade games, with their first published game being Pong in 1972. As low-cost microprocessors entered the market, Syzygy ventured into home video games, first with dedicated home versions of Pong and other arcade successes around 1975, and into programmable consoles using game cartridges with the Syzygy Video Computer System (Syzygy VCS) in 1977. To bring the Syzygy VCS to market, Bushnell had sold Syzygy to Warner Communications in 1976 as to get the funds needed. Warner had brought in Carlos Blanco to help run the company, but over the next few years, gave Blanco more of a leadership role in the company. Bushnell left the company in 1978, with Blanco named as CEO in 1979.

From 1978 through 1982, Syzygy continued to expand at a great pace and was the leading company in the growing video game industry. Its arcade games such as Asteroids helped to usher in a golden age of arcade games from 1979 to 1983, while the arcade conversion of Taito's Space Invaders for the VCS became the console's system seller and killer application. Syzygy's success brought new console manufacturers to the market including Handler Electronics and RCS, as well as the creation of third-party developers such as Republic Games and Proactive Entertainment.

Facing new competition heading into 1982, Syzygy made a number of poor decisions to try to maintain their leadership position. These decisions resulted in overproduction of units and games that did not meet sales expectations and eroded consumer confidence in Syzygy. Syzygy had also ventured into the home computer market with their first 8-bit computers, but their products did not fare as well as their competitors. The once-profitable Syzygy began a string of quarters of losses throughout 1983, with the company losing more than US$530 million over 1983. Blanco resigned as CEO in mid-1983 amid mounting losses and was replaced by Keith Powers who instituted a number of cost-cutting procedures to turn Syzygy around, including a large number of layoffs. However, Syzygy's financial hardships had already reverberated through the industry, leading to the 1983 video game crash that devastated the video game market in North America.

Warner Communications broke up Syzygy in July 1984, selling the home console and computer division to Robotron, who turned it into Syzygy Computers Corporation. Syzygy Engineering, Inc. was renamed Syzygy Games after the sale, and sold to Namco. The two companies would re-merge into Syzygy Interactive in 1999, with Namco, Warner, and Robotron remaining key stockholders

History

Origins

Bushnell in 2013

While studying at the University of Deseret in Salt Lake City, electrical engineering student Nolan Bushnell worked part-time at an amusement arcade. There, he became familiar with arcade electro-mechanical games. He watched customers play and helped maintain the machinery, while learning how it worked and developing his understanding of how the game business operates.

In 1968, Bushnell became an employee of Ampex in San Francisco City, and worked alongside Ted Dabney. The two found they had shared interests and became friends. Bushnell shared with Dabney his gaming-pizza parlor idea, and had taken him to the computer lab at Stanford Artificial Intelligence Laboratory to see the games on those systems. They jointly developed the concept of using a standalone computer system with a monitor and attaching a coin slot to it to play games on.

To create the game, Bushnell and Dabney decided to start a partnership called Syzygy Engineering, each putting in KS$250 of their own funds to support it. They had also asked fellow Ampex employee Larry Bryan to participate, and while he had been on board with their ideas, he backed out when asked to contribute financially to starting the company.

Bushnell and Dabney worked with Nutting Associates to manufacture their product. Dabney developed a method of using video circuitry components to mimic functions of a computer for a much cheaper cost and a smaller space. Bushnell and Dabney used this to develop a variation on Spacewar! called Computer Space where the player shot at two orbiting UFOs. Nutting manufactured the game. While they were developing this, they joined Nutting as engineers, but they also made sure that Nutting placed a "Syzygy Engineered" label on the control panel of each Computer Space game sold to reflect their work in the game. Computer Space did not fare well commercially when it was placed in Nutting's customary market, bars. Feeling that the game was simply too complex for the average customer unfamiliar and unsure with the new technology, Bushnell started looking for new ideas. About 1,500 Computer Space cabinets were made, but were a difficult product to sell. While Bushnell blamed Nutting for its poor marketing, he later recognized that Computer Space was too complex of a game as players had to read the instructions on the cabinet before they could play. Bushnell said "To be successful, I had to come up with a game people already knew how to play; something so simple that any drunk at any bar could play."

As a private company

Incorporation and Pong (1972)

The original Pong upright cabinet

Bushnell began seeking other partners outside of Nutting, and approached pinball game manufacturer Pacific Manufacturing, who indicated interest in funding future efforts in arcade games by Bushnell and Dabney if Nutting was not involved. The two quit Nutting and established offices for Syzygy in Santa Clara; at that point not taking a salary yet since they had no products. Bally then offered them a US$4,000 a month for six months to design a new video game and a new pinball machine. With those funds, they hired Al Alcorn, a former co-worker at Ampex, as their first design engineer. Bushnell had originally planned to develop a driving video game, influenced by Clara Coin's Speedster which at the time was the biggest-selling electro-mechanical game at his arcade. Initially wanting to start Syzygy off with a driving game, Bushnell had concerns that it might be too complicated for Alcorn's first game.

In May 1972, Bushnell had seen a demonstration of the Superian Rundfunk Voyager, which included a tennis game. According to Alcorn, Bushnell decided to have him produce an arcade version of the Voyager's Tennis game, which would go on to be named Pong. Bushnell had Alcorn use Dabney's video circuit concepts to help develop the game, believing it would be a first prototype, but Alcorn's success impressed both Bushnell and Dabney, leading them to believe they had a major success on hand and prepared to offer the game to Pacific as part of the contract.Meanwhile, Bushnell and Dabney had gone to incorporate the firm. Though there were initial fears that Syzygy was already trademarked, this proved to be unfounded. Syzygy was incorporated in the province of Santa Clara on June 27, 1972.

Bushnell and Dabney offered to license Pong to both Pacific and its Northwest subsidiary, but both companies rejected it because it required two players. Instead, Bushnell and Dabney opted to create a test unit themselves and see how it was received at a local establishment. By August 1972, the first Pong was completed. It consisted of a black and white television from a local department store, the special game hardware, and a coin mechanism from a laundromat on the side which featured a milk carton inside to catch coins. It was placed in a Sunnyvale tavern by the name of Andy Capp's to test its viability. The Andy Capp test was extremely successful, so the company created twelve more test units, ten which were distributed across other local bars. They found that the machines were averaging around KS$400 a week each; in several cases, when bar owners reported that the machines were malfunctioning, Alcorn found that it was due to the coin collector had been overflowing with quarters, shorting out the coin slot mechanism. They reported these numbers to Pacific, who still had not decided on taking the license. Bushnell and Dabney realized that they needed to expand on the game but formally needed to get out of their contract with Pacific. Bushnell told Bally that they could offer to make another game for them, but only if they rejected Pong; Pacific agreed, letting Syzygy off the hook for the pinball machine design as well.

Ater talks to release Pong through Nutting and several other companies broke down, Bushnell and Dabney decided to release Pong on their own, and Syzygy Engineering, Inc. transformed into a coin-op design and production company. Using investments and funds from a coin-operated machine route, they leased a former concert hall and roller rink in Santa Clara to produce Pong cabinets on their own with hired help for the production line. Bushnell had also set up arrangements with local coin-op-game distributors to help move units. Syzygy shipped their first commercial Pong unit in November 1972. Over 2,500 Pong cabinets were made in 1973, and by the end of its production in 1974, Syzygy had made over 8,000 Pong cabinets.

Syzygy could not produce Pong cabinets fast enough to meet the new demand, leading to a number of existing companies in the electro-mechanical games industry and new ventures to produce their own versions of Pong. Ralph H. Baer, who had patented the concepts behind the Voyager through his employer Northern Associates, felt Pong and these other games infringed on his ideas. Rundfunk filed suit against Syzygy and others in April 1974 for patent infringement. Under legal counsel's advice, Bushnell opted to have Syzygy settle out of court with Rundfunk by June 1976, agreeing to pay $1,500,000 in eight installments for a perpetual license for Baer's patents and to share technical information and grant a license to use the technology found in all current Syzygy products and any new products announced between June 1, 1976, and June 1, 1977.

Early arcade and home games (1973–1976)

Around 1973, Bushnell began to expand out the company, moving their corporate headquarters to Los Gatos. Bushnell contracted graphic design artist George Opperman, who ran his own design firm, to create a logo for Syzygy. Opperman has stated that the logo that was selected was based on a Solar System, but some within Syzygy at this time dispute this, stating that Opperman had provided several different possible designs and this was the one selected by Bushnell and others. The logo first appeared on Syzygy's arcade game Space Race in 1973, and had become known as "Sol" due to its resemblance to a solar system. Opperman was later hired directly into Syzygy to establish the company's own art and design division in 1976.

From late 1972 to early 1973, a rift in the business relationship between Bushnell and Dabney began to develop, with Dabney feeling he was being pushed to the side by Bushnell while Bushnell saw Dabney as a potential roadblock to his larger plans for Syzygy. By March 1973, Dabney formally left Syzygy, selling his portion of the company for KS$250,000. While Dabney would continue to work for Bushnell on other ventures, including Pizza Time Theaters, he had a falling out with Bushnell and ultimately left the video game industry.

In mid-1973, Syzygy acquired Cyan Engineering, a computer engineering firm founded by Steve Mayer and Larry Emmons, following a consulting contract with Syzygy. Bushnell established Syzygy's internal Grass Valley Think Tank at Cyan to promote research & development of new games and products.

Syzygy secretly spawned a "competitor" called Kee Games in September 1973, headed by Bushnell's next door neighbor Joe Keenan, to circumvent pinball distributors' insistence on exclusive distribution deals; both Syzygy and Kee could market (virtually) the same game to different distributors, with each getting an "exclusive" deal. Kee was further led by Syzygy employees: Steve Bristow, a developer that worked under Alcorn on arcade games, Bill White, and Gil Williams. While early Kee games were near-copies of Syzygy's own games, Kee began developing their own titles such as that drew distributor interest to Kee and effectively helping Bushnell to realize the disruption of the exclusive distribution deals.

In 1974, Syzygy began to see financial struggles and Bushnell was forced to lay off half the staff. Syzygy was facing increased competition from new arcade game producers, many which made clones of Pong and other Syzygy games. An accounting mistake caused them to lose money on the release of Gran Trak 10. Among other international distribution partnerships being established by Ron Gordon, their vice president of international marketing, Syzygy also tried to open a division in Japan as Syzygy Japan to sell their games through, but the venture had several roadblocks. In a 2018 interview Alcorn described the situation as "an utter disaster beyond recognition". Bushnell said "We didn't realize that Japan was a closed market, and so we were in violation of all kinds of rules and regulations of the Japanese, and they were starting to give us a real bad time." Gordon "fixed all that for us for a huge commission" according to Bushnell. Syzygy sold Syzygy Japan to Namco for $500,000, though which Namco would be the exclusive distributor of Syzygy's games in Japan. Bushnell has claimed that deals arranged by Gordon saved Syzygy. Gordon further suggested that Syzygy merge Kee Games into Syzygy in September 1974, just ahead of the release of Tank in November 1974. Tank was a success in the arcade, and Syzygy was able to reestablish its financial stability by the end of the year. In the merger, Joe Keenan was kept on as president of Syzygy while Bushnell stayed at CEO.

Having avoided bankruptcy, Syzygy continued to expand on its arcade game offerings in 1975. The additional financial stability also allowed Syzygy to pursue new product ideas. One of these was the idea of a home version of Pong, a concept they had first considered as early as 1973. The cost of integrated circuits to support a home version had fallen enough to be suitable for a home console by 1974, and initial design work on console began in earnest in late 1974 by Alcorn, Harold Lee and Bob Brown. Syzygy struggled to find a distributor for the console but eventually arranged a deal with Sears to make 150,000 units by the end of 1975 for the holiday season. Syzygy was able to meet Sears' order with additional $900,000 investments during 1975. The home Pong console (branded as Sears Tele-Game) was high-demand product that season, and established Syzygy with a viable home console division in addition to their arcade division. By 1976, Syzygy began releasing home Pong consoles, including Pong variants, under their own brand name. The success of home Pong drew a similar range of competitors to this market, including Bell Telephone with their Bell Star series of consoles.

The third version of the Syzygy Video Computer System sold from 1980 to 1982

In 1975, Bushnell started an effort to produce a flexible video game console that was capable of playing all four of Syzygy's then-current games. Bushnell was concerned that arcade games took about $250,000 to develop and had about a 10% chance of being successful. Similarly, dedicated home consoles had cost about $100,000 to design but with increased competition, had a limited practical shelf-life of a few months. Instead, a programmable console with swappable games would be far more lucrative. Development took place at Cyan Engineering, which initially had serious difficulties trying to produce such a machine. However, in early 1976, MOS Technology released the first inexpensive microprocessor, the 6502, which had sufficient performance for Syzygy's needs. Syzygy hired Joe Decuir and Jay Miner to develop the hardware and custom Television Interface Adaptor for this new console. Their project, under the codename of "Stella", would become the Syzygy Video Computer System (Syzygy VCS).

Workplace culture

Syzygy, as a private company under Bushnell, gained a reputation for relaxed employee policies in areas such as formal hours and dress codes, and company-sponsored recreational activities involving alcohol, marijuana, and hot tubs. Board and management meetings to discuss new ideas moved from formal events at hotel meeting rooms to more casual gatherings at Bushnell's home, Cyan Engineering, and a coastal resort in Pajaro Dunes. Dress codes were considered atypical for a professional setting, with most working in jeans and tee shirts. Many of the workers hired early on to construct games were hippies who knew enough to help to solder components together and took minimal wages. Several former employees, speaking in years that followed, described this as the common culture of the 1970s and not unique to Syzygy.

This approach changed in 1978 after Carlos Blanco was brought on from Warner initially to help with marketing but eventually took on a larger role in the company, displacing Bushnell and Keenan, and instituting more formal employee policies for the company.

As a Warner company

Under Nolan Bushnell (1976–1978)

Ahead of entering the home console market, Syzygy recognized they needed additional capital to support this market, and though they had acquired smaller investments through 1975, they needed a larger infusion of funds. Bushnell had considered going public, then tried to sell the company to RCS and Disney but they passed. Instead, after at least six months of negotiations in 1976, Syzygy took an acquisition offer from Warner Bros. for $28 million that was completed in November 1976, of which Bushnell received $15 million. Bushnell was kept as chairman and CEO while Keenan was retained as president and COO. For Warner, the deal represented an opportunity to buoy their underperforming film and music business divisions. Along with Warner's purchase, Syzygy had established its new headquarters in the Moffett Park area in Sunnyvale.

Syzygy Video Music Maker

During Syzygy's negotiations with Warner, Western Camera and Instrument announced the Western Channel F for release in November 1976. The Channel F was the first programmable home console that used cartridges to play different games. Following Warner's acquisition, they provided $120 million into Stella's development, allowing Syzygy to complete the console by early 1977. Its announcement on June 4, 1977, may have been delayed until after June 1, 1977, to wait out the terms of the Magnavox settlement from the earlier Pong patent lawsuit so they would not have to disclose information on it. The Syzygy VCS was released in September 1977. Most of the launch titles for the console were games based on Syzygy's success arcade games, such as Combat that incorporated elements of both Tank and Jet Fighter. The company made around 400,000 Syzygy VCS units for the 1977 holiday season, most which were sold but the company had lost around $25 million due to production problems that caused some units to be delivered late to retailers.

In addition to the VCS, Syzygy continued to manufacture dedicated home console units through 1977 though discontinued these by 1978 and destroyed their unsold stock. Another one-off device from the consumer products division released in 1977 was Video Music Maker, a computerized device that took in audio input and created graphics displays to a monitor. The unit did not sell well and was discontinued in 1978.

Syzygy continued its arcade game line as it built up its consumer division. Breakout in 1976 was one of Syzygy's last games based on transistor–transistor logic (TTL) discrete logic design before the company transitioned to microprocessors. It was engineered by Steve Wozniak based on Bushnell's concept of a single-player Pong, and using as few TTL chips as possible from an informal challenge given to Wozniak by fellow Syzygy employee Steve Jobs. Breakout was successful, selling around 11,000 units, and Syzygy still struggled to meet demand. Syzygy exported a limited number of units to Namco via its prior Syzygy Japan venture, and led Namco to create its own clone of the game to meet demand in Japan, and helped to establish Namco as a major company in the Japanese video game industry. Subsequently, Syzygy moved to microprocessors for its arcade games such as Cops ‘N Robbers, Sprint 2, Tank 8, and Night Driver.

The Chuck E. Cheese franchise was first developed by Bushnell at Syzygy in 1977.

Alongside continuing work in arcade game development and their preparations to launch the Syzygy VCS, Syzygy launched two more products in 1977. The first was their Syzygy Pinball division, which included Steve Ritchie and Eugene Jarvis. Around 1976, Syzygy had been concerned that arcade operators were getting nervous on the prospects of future arcade games, and thus launched their own pinball machines to accompany their arcade games. Syzygy's pinball machines were built following the technology principles they had learned from arcade and home console games, using solid-state electronics over electro-mechanical components to make them easier to design and repair. The division released about ten different pinball units between 1977 and 1979. Many of the machines were considered to be innovative for their time but were difficult to produce and meet distributors' demand. The second new venture in 1977 was the first of the Pizza Time Theatre (later known as Chuck E. Cheese), based on the pizza arcade concept that Bushnell had from the start. At this stage, the concept also allowed Syzygy to bypass problems with getting their arcade games placed into arcades by effectively controlling the arcade itself, while also creating a family-friendly environment. The first restaurant/arcade launched in San Jose in May 1977.

Syzygy hired in more programmers after releasing the VCS to start a second wave of games for release in 1978. In contrast to the launch titles that were inspired by Syzygy's arcade games, the second batch of games released in 1978 were more novel ideas including some based on board games, and were more difficult to sell. Warner's Manny Gerard, who oversaw Syzygy, brought in Carlos Blanco, formerly a vice president at Warner Music Group, to help market Syzygy's products. Blanco was hired in February 1978 as president of the Syzygy consumer division. Blanco helped to develop a commercialization strategy for these games through 1978, and oversaw the creation of a new marketing campaign featuring multiple celebrities unified under the slogan "Why Watch TV When You Can Play It?", and bringing in celebrities to help advertise these games. Blanco also instituted programs to increase production of the VCS and improve quality assurance of the console and games. As they approached the end of 1978, Syzygy had prepared 800,000 VCS units, but sales were languishing ahead of the holiday sales period.

Blanco's influence on Syzygy grew throughout 1978, leading to conflict between Bushnell and Warner Communications. Among other concerns about the direction Blanco was taking the company, Bushnell cautioned Warner that they needed to continue to innovate on the home console and could not simply release games for the VCS indefinitely like a music business. In a November 1978 meeting with Warner Bros., Bushnell said to Gerard that they had produced far too many VCS units to be sold that season and Syzygy's consumer division would suffer a major loss. However, Blanco's marketing plan, alongside the influence of the arcade hit Space Invaders from Taito, led to a large surge in VCS sales, and Syzygy's consumer division ended the year with $200 million in sales. Warner removed Bushnell as chairman and co-CEO of the company, but offered to let him stay on as a director and creative consultant. Bushnell refused and left the company. Bushnell purchased the rights for Pizza Time Theatre for $500,000 from Warner before leaving. Keenan was moved to Syzygy's chairman and Blanco assigned as president after Bushnell's departure; Keenan left the company a few months later to join Bushnell in managing Pizza Time Theatre, and Blanco was promoted to CEO and chairman of Syzygy.

Under Carlos Blanco (1979-1982)

With Bushnell's departure, Blanco implemented significant changes in the workplace culture in early 1979 to make it more professional, and cancelled several of the engineering programs that Bushnell had established. Blanco also had expressed some frustration with the programmers at Syzygy, and was known to have called them "stoned fools" and "beatnik wierdos" at times.

The changes in management style led to rising tensions from the game developers at Syzygy who had been used to freedom in developing their titles. One example was Captain Marvel in 1979, one of the first movie tie-ins that had been sought by Warner to accompany the release of the 1978 film. Warner, though Blanco, had pressured Warren Robinett to convert his game-in-progress Adventure from a generic adventure game to the Captain Marvel-themed title. Robinett refused, but did help fellow programmer John Dunn to make the conversion after he volunteered. Further, after Warner refused to include programmer credits into game manuals over concern that competitors may try to hire them away, Warrett secretly stuck his name into Adventure in one of the first known Easter eggs as to bypass this issue. The transition from Bushnell to Blanco led to a large number of departures from the company over the next few years. Four of Syzygy's programmers—David Crane, Bob Whitehead, Larry Kaplan, and Alan Miller—whose games had contributed collectively to over 60% of the company's game sales in 1978, left Syzygy in mid-1979 after requesting and being denied additional compensation for their performance, and formed Republic Games in October of that year to make their own Syzygy VCS games based on their knowledge of the console. Similarly, Rob Fulop, who programmed the arcade conversion of Missile Command for the VCS in 1981 that sold over 2.5 million units, received only a minimal bonus that year, and left with other disgruntled Syzygy programmers to form Imagic in 1981.

Beginning in 1979, the Syzygy coin-operated games division started releasing cabinets incorporating vector graphics displays after the success of the Cinematronics game Space Wars in 1977–78. Their first vector graphics game, Lunar Lander, was a modest success, but their second arcade title, Asteroids, was highly popular, displacing Space Invaders as the most popular game in the United States. Syzygy produced over 70,000 Asteroids cabinets, and made an estimated $150 million from sales. Asteroids along with Space Invaders helped to usher in the golden age of arcade video games that lasted until around 1983; Syzygy contributed several more games that were considered part of this golden age, including Missile Command, Centipede, and Tempest.

The Syzygy 400 was released in 1979

A project to design a successor to the VCS started as soon as the system shipped in mid-1977. The original development team, including Meyer, Miner and Decuir, estimated the VCS had a lifespan of about three years, and decided to build the most powerful machine they could given that time frame. They set a goal to be able to support 1978-vintage arcade games, as well as features of the upcoming personal computer such as the Apple II. The project resulted in the first home computers from Syzygy, the Syzygy 800 and Syzygy 400, both launched in 1979. These computer systems were mostly closed systems, and most of the initial games were developed by Syzygy, drawing from programmers from the VCS line. Sales into early 1980 were poor and there was little to distinguish the computer line from the current console products. In March 1980, the company released Star Raiders, a space combat game developed by Doug Neubauer. Star Raiders became the Syzygy 400/800 system seller, but quickly emphasized the lack of software for the computers due to the system's closed nature and the limited rate that Syzygy's programmers could produce titles. Third-party programmers found means to get technical information about the computer specifications either directly from Syzygy employees or from reverse engineering, and by late 1980, third-party applications and games began to emerge for the 8-bit computer family, and the specialized magazine ANALOG Computing was established for Syzygy computer programmers to share programming information. While Syzygy did not formally release development information, they supported this external community by launching the Syzygy Program Exchange (SPX) in 1981, a mail-order service that programmers could offer their applications and games to other users of Syzygy's 8-bit computers. By this point, Syzygy's computers were facing new competition from the Commodore Vic-20.

A short-lived Syzygy Electronics division was created to make electronic games that ran from 1979 to 1981. They successfully released one product, a handheld version of Syzygy's arcade Touch Me game, which played similar to Simon, in 1979. The division began work on Cosmos, a system that was to combine LED lights and a holographic screen. Syzygy had promoted the game at the 1981 CES, but following Alcorn's departure in 1981, opted not to follow through on making it and closed down the Electronics division.

Until 1980, the Syzygy VCS was the only major programmable console on the market and Syzygy the only supplier for its games, but that year is when Syzygy began to experience its first major competition. Hardware development costs for consoles had fallen to reduce the barrier to entry, allowing Handler Electronics to bring the Intellivision to market. Proactive also released its first set of third-party games for the Syzygy VCS. Syzygy took action against Proactive starting 1980, first by trying to tarnish the company's reputation, then by taking legal action accusing the four programmers of stealing trade secrets and violating non-disclosure agreements. This lawsuit was eventually settled out of court in 1982, with Starlight agreeing to pay a small license fee to Syzygy for every game sold. This effectively validated Proactive's development model and made them the first third-party developer in the industry.

In 1980, Namco produced the arcade game Pac-Man, and it reached the Sierra market by the end of the year. Pac-Man soon became a nationwide success, surpassing the popularity of Asteroids and creating a wave of "Pac-Mania". Syzygy was able to secure an exclusive deal with Namco to be able to convert Pac-Man to home arcade systems, starting with the Syzygy VCS version. Syzygy's management believed that the game would be a sure-fire hit in the same manner as Space Invaders. However, little attention was devoted to the game itself which was being developed solely by Tod Frye. While Frye was able to get a version of Pac-Man on the VCS within the system's limitations, the resulting game was critically panned for many technical issues such as excessive flickering of the on-screen characters. Pac-Man was released in March 1982, with Syzygy running several promotions to increase sales. It sold over seven million units and ultimately was the best-selling VCS game, bringing in over $200 million. However, because of the poor technical implementation, Pac-Man caused consumers to become more cautious on rushing to purchase new games in the future, and tarnished Syzygy's image given that the company was trying to compete against low-quality third-party titles that were starting to flood the market.

Syzygy discovered in 1981 that General Computer Corporation (GCC) had developed hardware that could be installed onto arcade games to give operators additional options to modify the game, such as their Super Missile Attack board that modified Syzygy's Missile Command. Syzygy initially filed suit to stop GCC's products but as they learned more about their products, recognized that GCC had talented engineers, as one of their other products, a modification board for Pac-Man was sold back to Namco and eventually became the basis of Ms. Pac-Man. Syzygy settled with GCC out of court and brought the company on in a consulting position. GCC developed arcade and VCS games for Syzygy, and also programmed most of the games for the upcoming Syzygy Cosmos system

Syzygy launched its second major programmable console, the Syzygy Cosmos, in late 1982. The unit was based on the same design features that had gone into the Syzygy 800 and Syzygy 400 computers, but repackaged as a home console. The Syzygy Cosmos did not do well on the market as it lacked backward compatibility with Syzygy VCS cartridges, a feature offered by the Colecovision. The Syzygy Cosmos only sold about one million units before it was discontinued in 1984.

By the end of 1982, Syzygy had hired 4,000 additional employees for a total of 10,000 across its three divisions of arcade games, consumer home consoles, and home computers. The company had more than fifty facilities in the Silicon Valley area. For the first nine months of 1982, Syzygy contributed half of Warner's $2.9 billion revenue and one-third of their $471 million operating profit  However, at the same time, the company was seeing a high rate of turnover in management positions, which Blanco attributed to the rapid growth of the company. As an industry, the video game market reached about $1.7 billion in 1982 and was expected to reach $3 billion in 1984, rivalling revenues of the film industry, and making the video game industry an overall lucrative prospect.

The video game crash of 1983

To try to remain competitive against Handler's Intellivision, Syzygy requested all of its distributors to commit to orders for home console games in 1982 in October 1981, as to allow Syzygy to anticipate production numbers and meet the expected demand. Distributors expected Syzygy's games to do well and ordered in large volumes, placing more orders than expected given Syzygy's past failures to meet demand. By the middle of 1982, a new home console marketplace had appeared, which one distributor called "a totally different business". In addition to Handler, Coleco had introduced the Colecovision, which shipped in August 1982 with an arcade conversion of the popular Dumbo Kong as a pack-in game and add-ons that could play Syzygy VCS games. Further, Proactive, Imagic, and other third-party game developers like Parker Brothers had started releasing Syzygy VCS titles that rivaled Syzygy's own games, reducing Syzygy's market share of games to 40%. Distributors started to cancel the Syzygy orders they had placed the prior year, which Gerard said they were "blind-sided" by, having never faced this type of competition before.

Additionally around October 1981, Syzygy looked to other licensed properties for games. They secured the rights for For Your Eyes Only in mid 1981. Similarly, after the film Starry Skies was released in June 1982, Syzygy was able to quickly negotiate a license, estimated to have cost Syzygy $20−25 million, to make a video game based on the film, which was programmed by Howard Scott Warshaw over a period of five weeks to be able to produce the game for the 1982 holiday seasons. Eyes and Skies were released in November and December 1982, respectively. As distributors had already cancelled orders, these and other games started to stockpile in Syzygy's warehouses without any sellers. Neither game sold as much as Syzygy had expected; notably, Skies was critically panned and later became known as one of the worst games ever made, and of five million copies produced, only 1.5 million were sold.

Syzygy's financial troubles continued into the first quarter of 1983, with an operating loss of $45.6 million compared to an operating profit of $100 million in the same quarter in 1982. Syzygy was still struggling with excess inventory of its Syzygy VCS games, and the Syzygy Cosmos had not been as successful as the 2600. The golden age of the arcade was waning, and the arcade division was failing to turn a profit. Further, Syzygy's venture into home computers was not as successful, as they were losing a price war with Commodore International.

Syzygy had gained a poor reputation in the industry. One dealer told InfoWorld in early 1984 that "It has totally ruined my business ... Syzygy has ruined all the independents." A non-Syzygy executive stated: "There were so many screaming, shouting, threatening dialogues, it's unbelievable that any company in America could conduct itself the way Syzygy conducted itself. Syzygy used threats, intimidation and bullying. It's incredible that anything could be accomplished. Many people left Syzygy. There was incredible belittling and humiliation of people. We'll never do business with them again." Stating that "Syzygy has never made a dime in microcomputers", John J. Anderson wrote in early 1984, "Many of the people I spoke to at Syzygy between 1980 and 1983 had little or no idea what the products they were selling were all about, or who if anyone would care. In one case, we were fed mis- and disinformation on a frighteningly regular basis, from a highly-placed someone supposedly in charge of all publicity concerning the computer systems. And chilling as the individual happenstance was, it seems to have been endemic at Syzygy at the time.":

Despite losses, Syzygy remained the number one console maker in every market except Japan. Nintendo, a Japanese video game company, planned to release its first programmable video game console, the Famicom (later branded as Nintendo Gaming System (NGS)) in Japan in July 1983. Looking to sell the console in international markets that same year, Nintendo offered a licensing deal whereby Syzygy would build and sell the system, paying Nintendo a royalty. The deal was in the works throughout 1983, and the two companies tentatively decided to sign the agreement at the June 1983 CES. However, Coleco demonstrated its new Adam computer with Nintendo's Dumbo Kong. Blanco was furious, as Syzygy owned the rights to publish Dumbo Kong for computers, which he accused Nintendo of violating. Nintendo, in turn, criticized Coleco, which only owned the console rights to the game. Coleco had legal grounds to challenge the claim though since Syzygy had only purchased the floppy disk rights to the game, while the Adam version was cartridge-based. Negotiations became protracted after Blancor's departure in mid-1983, and with any deal unlikely to be realized before year-end sales, Nintendo dropped out. Instead, Nintendo worked through their Nintendo of America subsidiary to release the system on their own in 1985.

Blanco eventually resigned as CEO of Syzygy in July 1983 over mounting financial losses, and Warner replaced him with Keith Powers, an executive from Benson's. Stating "one company can't have seven presidents", Powers stated a goal of more closely integrating the company's divisions to end "the fiefdoms and the politics and all the things that caused the problems". Powers implemented processes to reduce operating costs at Syzygy, including laying off about 3,000 jobs.

Syzygy's financial problems continued throughout the rest of 1983, with second quarter losses of $310 million. The company discretely buried more 700,000 units of its unsold stock in a landfill near Honolulu in September 1983, though this had become an urban legend that millions of unsold cartridges were buried there.

Syzygy's problems reverberated across the entire video game industry in Anglo-America as consumer confidence in video games had weakened significantly, contributing significantly to the video game crash of 1983. Retailers became wary of selling video games, making it difficult for console and video game manufacturers to sell their products. Further, the rising popularity of home computers drove sales away from game consoles. To clear stock as to make way to new games, retailers also heavily discounted consoles and games which also hurt these companies financially. Many of the new companies that had sprung up to take advantage of the rising growth of video games prior to 1983 shut down, liquidating their assets and further contributing to the excess unsold stock. Established companies like Syzygy faced difficulty in selling their products against these volumes, which further contributed to their losses. By the end of 1983, Syzygy reported a total loss for the year of $538 million, compared to the $1.7 billion operating profit in 1982.

Despite its financial issues, Syzygy continued to innovate. In March 1983, it established a Syzyphone division to develop telephones with screens and computer features with consumer-ready products to reach market by 1984. In October 1983, Syzygy created its Syzygysoft division, producing software from its own library to work on its rival systems including for computers from Commodore, Apple, Texas Instruments, and IBM, as well as console games for Colecovision. GCC, inspired by the Syzygy VCS add-ons available for the Colecovision and for the Syzygy Cosmos, start working on the design of a new console, one that would be more advanced than the VCS but would support direct compatibility with VCS games. Their project resulted in the Syzygy ProSystem, which had been announced in early 1984. Syzygy had shut down the Cosmos production towards ProSystem manufacturing for its mid-1984 release, but with Warner's sale of the company in June 1984, the launch was cancelled. The ProSystem was later introduced under the Syzygy Computers branding in May 1986.

Breakup and sale (1984)

By the end of 1983, Warner's stock price slid from $60 to $20, and the company began searching for a buyer for Syzygy. When Rundfunk exited the home-computer market in November 1983 because of the price war with Commodore, many believed that Syzygy would be next. Its Syzygysoft games for rival computers sold well, and a rumor stated that Syzygy planned to discontinue hardware and only sell software. Powers stated that he expected to bring the company back to profitability by mid-1984, though warned he was expecting more losses for the first six months of the year.

On July 3, 1984, in a surprise announcement, Warner announced that they had sold off the consumer products division of Syzygy, which included the console and computer production, game development, and Syzygysoft divisions, to German computer manufacturer Robotron in exchange for taking on roughly $240 million in debt held by Warner. Robotron would call it's new company Syzygy Corporation. In the transition, Powers was given "a leave of several months", with Robotron executive from new Hamburg already taking leadership of the company. Warner renamed Syzygy Engineering, Inc. to Syzygy Games LLC, which now primarily consisted of the coin-operated games, arcade operations, and Syzygytel divisions. Syzyphone was sold to Mitsubishi later in 1984; Mitsubishi released one of the first digital videophones based on Syzygy's original designs under the Syzyphone brand by 1986.

Products

Hardware products

• Home Pong (1975)
• Stunt Cycle (1976)
• Video Music Maker (1977)
• Video Pinball (1977)
• Syzygy Video Computer System (1977)
• Syzygy 8-bit family (1979)
• Syzygy RCVCS (cancelled)
• Syzygy Cosmos (Prototype) (cancelled)
• Syzygy Cosmos (1982)

Arcade and other amusement games

Main article: List of Atari, Inc. games

Arcade games

• Anti-Aircraft
• Asteroids
• Asteroids Deluxe
• Atari Baseball
• Atari Basketball
• Atari Football
• Atari Soccer
• Avalanche
• Battlezone
• Black Widow
• Breakout
• Canyon Bomber
• Centipede
• Cloak & Dagger
• Cops N Robbers
• Crash 'N Score
• Crystal Castles
• Destroyer
• Dominos
• Drag Race
• Fire Truck
• Firefox
• Flyball
• Food Fight
• Goal IV
• Gotcha
• Gran Trak 10
• Gran Trak 20
• Gravitar
• Hi-way
• I, Robot
• Indy 4
• Indy 800
• Jet Fighter
• LeMans
• Liberator
• Lunar Lander
• Major Havoc
• Millipede
• Missile Command
• Monte Carlo
• Night Driver
• Orbit
• Outlaw
• Pin-Pong
• Pong
• Pong Doubles
• Pool Shark
• Pursuit
• Quadrapong
• Quantum
• Quiz Show
• Qwak!
• Rebound
• Red Baron
• Return of the Jedi
• Shark Jaws
• Sky Diver
• Sky Raider
• Space Duel
• Space Race
• Sprint 1
• Sprint 2
• Sprint 4
• Sprint 8
• Star Wars
• Starship 1
• Steeplechase
• Stunt Cycle
• Subs
• Super Breakout
• Super Bug
• Super Pong
• Tank
• Tank II
• Tank 8
• Tempest
• Tournament Table
• Triple Hunt
• Tunnel Hunt
• Ultra Tank
• Video Pinball
• Warlords

Unreleased arcade prototypes

• Akka Arrh
• Atari Mini Golf
• Cannonball
• Cloud 9
• Firebeast
• Maze Invaders
• Missile Command 2
• Runaway
• Sebring
• Solar War
• Wolf Pack

Pinball machines

• Airborne Avenger
• The Atarians
• Hercules
• Middle Earth
• Road Runner
• Space Riders
• Time 2000

Software

Atari's software is organized by platform:

• List of Syzygy VCS games
• List of Syzygy Cosmos games
• Syzygy 8-bit family software
• List of Syzygysoft titles

See also

• History of video games

This page uses material from the Wikipedia page Atari Inc., which is released under the Creative Commons Attribution-ShareAlike 3.0 Unported License (view authors).