An arcade video game is an arcade game where the player's inputs from the game's controllers are processed through electronic or computerized components and displayed to a video device, typically a monitor, all contained within an enclosed arcade cabinet. Arcade video games are often installed alongside other arcade games such as pinball and redemption games at amusement arcades. Up until the late 1990s, arcade video games were the largest and most technologically advanced sector of the video game industry. The first arcade game, Computer Space, was created by Nolan Bushnell and Ted Dabney, the founders of Atari, Inc., and released in 1971; the company followed on its success the next year with Pong. The industry grew modestly until the release of Taito's Space Invaders in 1978 and Namco's Pac-Man in 1980, creating a golden age of arcade video games that lasted through about 1983. At this point, saturation of the market with arcade games led to a rapid decline in both the arcade game market and arcades to support them. The arcade market began recovering in the mid-1980s, with the help of software conversion kits, new genres such as beat 'em ups, and advanced motion simulator cabinets. There was a resurgence in the early 1990s, with the birth of the fighting game genre with Capcom's Street Fighter II in 1991 and the emergence of 3D graphics, before arcades began declining in the West during the late 1990s. After several traditional companies closed or migrated to other fields (especially in the West), arcades lost much of their relevance in the West, but have continued to remained popular in Eastern and Southeastern Asia.
Early arcade games
Since the early 20th century, skee ball and other pin-based games had been a popular arcade game. The first pinball machines had been introduced in the 1930s but gained a reputation as games of chance and had been banned from many venues from the 1940s through the 1960s. Instead, newer coin-operated electro-mechanical games (EM games), classified as games of skill took their place in amusement arcades by the 1960s. Following the arrival of Sega's EM game Periscope (1966), the arcade industry was experiencing a "technological renaissance" driven by "audio-visual" EM novelty games, establishing the arcades as a healthy environment for the introduction of commercial video games in the early 1970s. In the late 1960s, a college student Nolan Bushnell had a part-time job at an arcade where he became familiar with EM games through watching customers play and helping to maintain the machinery, while learning how it worked and developing his understanding of how the game business operates.
Arrival of arcade video games (1971−1977)
While early video games running on computers had been developed as far back as 1950, the first video game to spread beyond a single computer installation, Spacewar!, was developed by students and staff at MIT on a PDP-1 mainframe computer in 1962. As the group that developed it migrated across the country to other schools, they took Spacewar!'s source code to run on other mainframe machines at those schools. It inspired two different groups to attempt to develop a coin-operated version of the game. Around 1970, Nolan Bushnell was invited by a colleague to see Spacewar! running on Stanford University's PDP-6 computer. Bushnell got the idea of recreating the game on a smaller computer, a Data General Nova, connected to multiple coin-operated terminals. He and fellow Ampex employee Ted Dabney, under the company name Syzygy, worked with Nutting Associates to create Computer Space, the first commercial arcade game, with location tests in August 1971 and production starting in November. More than 1300 units of the game were sold, and while not as large of a hit game as hoped, it proved the potential for the coin-operated computer game. At Stanford University, students Bill Pitts and Hugh Tuck used a PDP-11 mainframe to build two prototypes of Galaxy Game, which they demonstrated at the university starting in November 1971, but were unable to turn into a commercial game. Bushnell got the idea for his next game after seeing a demonstration of a table tennis game on the Magnavox Odyssey, the first home video game console that was based on the designs of Ralph H. Baer. Deciding to go on their own, Bushnell and Dabney left Nutting and reformed their company as Atari Inc., and brought on Allan Alcorn to help design an arcade game based on the Odyssey game. After a well-received trial run of a demo unit at Andy Capp's Tavern in San Jose, California in August 1972, Pong was first released in limited numbers in November 1972 with a wider release by March 1973. Pong was highly successful, with each machine earning over US$40 a day, far greater than most other coin-operated machine at the time. With Pong's success, numerous other coin-operated manufacturers, most who were making electro-mechanical games and pinball machines, attempted to capitalize on the success of arcade games; such companies included Bally Manufacturing, Midway Manufacturing, and Williams Electronics, as well as Japanese companies Taito and Sega. Most took to trying to copy the games that Atari had already made with small alterations, leading to a wave of clones. Bushnell, having failed to patent on the idea, considered these competitors "jackals" but rather than seeking legal action, continued to have Atari devise new games. Separately, Magnavox and Sanders Associates, through which Baer had developed the basics of the Odyssey, sued Atari, among the other manufacturers, for patent violations of the basic patents behind the electronic game concepts. Bushnell opted to settle out of court, negotiating for perpetual licensing rights to Baer's patents for Atari as part of the settlement fee, which allowed Atari to pursue the development of additional arcade games and bringing Pong in a home console form, while Magnavox continued legal against the other manufacturers. It is estimated that Magnavox collected over US$100 million in awards and settlements from these suits over the Baer patents.
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