Atari files for bankruptcy protection

In what is surely the most shocking piece of financial news to hit the wires this week, retro gaming icon Atari announced it was filing for bankruptcy. The surprise, to be sure, isn’t that the Pong-maker had hit the skids, but that the company was even still around. Even more startling is that the company is profitable, and there's still a demand out there for ‘80s-era games, apparently.

Before we get into the specifics, let’s look back to the last time Atari was spotted in public.

That would be sometime around 1982, when Atari was the fastest growing company in the U.S., and its 2600 faux-wood paneled console was selling in the millions. By then, a version of the firm had been around for 10 years, having got its start as progenitor of arcade video machines.

The founders’ great inspiration was not so much in anticipating the appeal of home-based arcade games - that much was obvious - but in coming up with Apple-like console that could easily connect to a TV and that was so simple to use that anyone could immediately play. (A lesson immediately lost on VCR designers during the same time period)

As anyone in their 40s and beyond knows, Atari’s breakthrough moment was Pong, an adaptation of a popular arcade game at the time that was basically two paddles and a ball. Pong’s success soon led to Centipede, Asteroids and Missile Command, and by 1983, Atari essentially owned the video game market, and was on the forefront of a consumer electronics boom that has yet to slow down.

And, well, so much for first-mover advantage. Atari was so far out in front, it lost track of the field. Even with the backing of Warner Bros, which bought the company soon after Pong’s arrival, Atari struggled to maintain momentum.

A bid to expand into personal computing, still a nascent technology at the time, was stymied when factions in the company refused to cooperate, resulting in products that wouldn’t work together. Atari computer users, for instance, were out of luck if they wanted to play Missile Command. Those sorts of snafus combined with the rise of competitors such Intellivision (which, for the record was shuttered in 1991), led to Warner selling the flailing business in 1985.

From there, the saga is too convoluted and dispiriting to recount. Management misfires combined with engineering glitches led to brawls and lawsuits, as the company ricocheted into irrelevance. At perhaps the lowest point, in 1998, Atari was unloaded to Hasbro for US$5 million, a fraction of what Warner had paid for it two decades earlier.

Normally, this would be the end of the road for a legend like this; at least from a commercial perspective. As these things normally go, the remaining rights, along with a collection of vintage arcade machines, would be bought as a quirky bauble by some self-made tech mogul, to be delivered up as a fun fact for the exec’s next profile in Fortune or Forbes.

That’s where the Atari story would end, if not Pong’s and Asteroid’s retro appeal as a fun game for smartphones. There’s money to be made there, which the company’s U.S.-based division would do, if it weren’t saddled under the debt of its Paris-headquartered parent firm. Filing for bankruptcy is the path the U.S. arm is pursuing to escape from those cash woes and start again.