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Many Video Games Designers Travel Rags-to-Riches-to-Rags Journey

January 14, 1986|From The Washington Post

WASHINGTON — Barely three years ago, Howard Warshaw was a superstar. The wisecracking, shaggy-haired 24-year-old from Scotch Plains, N.J., was raking in nearly $1 million a year, featured in national magazines and hounded for autographs by a devoted cult following of teen-agers.

A rock star? An athlete? A movie star?

None of the above. Howard Warshaw designed video games.

Remember video games? A multibillion-dollar business, they were supposed to be the vanguard of a new generation of home entertainment. Pac Man was the Mickey Mouse of the 1980s, and those few hundred gifted young game designers were going to be the digital Disneys of the computer age.

"We were like renegade Picassos involved in the pioneering of a new kind of technology," said Warshaw, who began his career as a $24,000-a-year programmer at Atari Inc. a year before the boom. "I don't know how many people appreciate how much of a trip this really was. This was the most intense experience of my life. This was the greatest thing that ever happened to me."

The trip is over now. Warshaw's hair isn't shaggy, his income wouldn't impress a yuppie, and, other than friends and family, few can recall who he is. "It's a good thing I . . . carry an American Express card," he said ruefully.

Now Sells Real Estate

Warshaw now sells real estate. He expects to receive his California broker's license this month.

"I think my talents would be better leveraged in other areas," he observed.

What happened?

In one of the most dramatic reversals in American business, video games proved to be neither an industry nor a new art form, but a fad with the economic durability of the hula hoop.

Christopher D. Kirby, who once covered video games as a securities analyst for Sanford C. Bernstein, said that when the market peaked in 1983, sales amounted to between $5 billion and $6 billion. "I thought it would decline in some fashion but I certainly didn't expect it to disappear as much as it has," he said.

Today, there are virtually no video games companies for Kirby to follow; he now tracks the semiconductor industry.

When the market collapsed in 1984, the "vid kids"--whose technical talents had brought them to a pinnacle of success in their 20s or early 30s--saw their dreams, ambitions and income evaporate.

"A lot of people handled it well on the way up," Warshaw recalled, "but on the way down, the people who were losers became big losers. Some people gave up. People grasped at straws. People became desperate. People believed this was never going to go away. Some people just went crazy.

"As a group, we were a bunch of screaming babies. We lost our perspective. But to get an industry started like that, you needed a bunch of screaming babies."

"We thought it could go on forever," said Dennis Koble, 35, formerly of Atari and co-founder of Imagic, a hot little video games company that saw its sales zoom from zero to $75 million in a single year and is now just hanging on for dear life. "When you get the big money for the first time, you think it's never going to end.

"There was this opportunity to become filthy rich. It was like winning the lottery back then. There was the distinct chance of winning the lottery. We didn't know it was unusual to sell a million cartridges. We never really had anything to compare it to. Consequently, I think we didn't realize there was a real world out there."

It was easy to make the money in boom times, Koble and other ex-designers assert. Companies such as Atari and Mattel Electronics offered their "talent" tremendous base salaries, royalties on cartridge sales and bonuses as "golden shackles" to prevent them from jumping to other firms.

The money hinged on the designer's ability to cram a game--the graphics, the play, the sound--into a few lines of computer code. That code, burnt into a silicon chip, determined how images would appear and move across the screen. The cartridges containing the chips cost about $2.50 to make in volume; the video games companies sold them for $30 each. Buyers plugged them into games consoles attached to their TV sets and blasted away at space creatures or zipped through mazes using joy sticks and blaster buttons.

Earnings in Six Figures

"Most of the people who had a moderate-hit cartridge--sales in the several hundred thousand range--could make $200,000 to $300,000," Koble said. "Even people who didn't have a cartridge could make $50,000 to $100,000 a year."

Warshaw was a supernova in Atari's star system. When the company acquired rights to Steven Spielberg's hit movie "E.T." in 1982, it turned to Warshaw to create the video game version in time to catch the Christmas season.

Warshaw designed and programmed his version of "E.T." in five weeks flat--the computer equivalent of simultaneously composing and playing a minute waltz in under 30 seconds. For his efforts, Atari reportedly paid him $200,000 and threw in an all-expenses-paid vacation to Hawaii.

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