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One Game to Rule Them All

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On this day in economic and financial history...

All the Angry Birds, Sims, Master Chiefs, and other game characters of the world trace their heritage to one simple black-and-white game of lines and blocks, first released on Nov. 29, 1972. Pong wasn't the first video game ever released, but it was the first to achieve widespread success. It not only made Atari a household name, but is also credited with launching a profitable video gaming industry.

Atari had been founded mere months before it released Pong on an unsuspecting world. Originally designed as a "training exercise" by Al Alcorn, Pong's innovations -- variable ball speeds and angled return serves based on where the ball hit the paddle -- set it apart from earlier tennis-based game concepts. It was beta tested in a local bar, where Alcorn later discovered it had malfunctioned because too many quarters had been jammed into the coin slot.

The new game's powerful appeal eventually brought Atari orders for over 8,000 highly profitable Pong arcade systems. It was soon ported to use in the home, and this version of the game, marketed under the Sears (Nasdaq: SHLD  ) brand name, shot to the top of that retailer's sales charts during the 1975 holiday season. Unfortunately for Atari, the game's simplistic design (it's just a bunch of blocks!) was soon copied, and it lacked the patent protection to fend off the knockoffs.

A flood of competitors entered the infant video-gaming market. By 1977, there were so many Pong clones that Atari was forced to sell its systems at a loss to get rid of excess inventory. The company nearly went belly up. Other competitors, including processor pioneer Fairchild Semiconductor (NYSE: FCS  ) , were forced to abandon their dreams of video game domination -- the Fairchild Channel F, 1977's second-best-selling home console, was out of the market two years later. Had this early overproduction not occurred, the console landscape might look quite different.

Atari's success, beginning with Pong, also directly led to the creation of Activision Blizzard  (Nasdaq: ATVI  ) , the leading publisher of modern video games. By 1979, several of Atari's key programmers had gotten fed up with the lack of recognition they received on the games they'd helped create. The dismissive response of Atari's CEO led this small team to defect, and Activision -- the first third-party console game developer -- was born.

Video games are, to put it mildly, big business today. Consumers spent about $17 billion on video games in 2011. The global market for games is estimated to reach $67 billion by the end of 2012, and $82 billion by 2017.

Unfortunately, the cutthroat nature of the games industry means that a few players make most of the money. But there are other ways to profit from the world's obsession with games. One company produces the hardware necessary to make all these games run at peak performance, whether it's on the PC, in consoles, or on your smartphone or tablet. Want to learn more about this company? Its exciting potential is detailed in our exclusive free report. Click here to find out more now -- at no cost.

Do you know the way to San Jose?
Silicon Valley's largest city was founded on Nov. 29, 1777, as El Pueblo de San José de Guadalupe. You know it today simply as San Jose. The town was originally a farming community in the Spanish territory of Nueva California, but has since grown to become a modern technological powerhouse city in a region known for its tech prowess.

Many top tech companies either make their homes in, or maintain significant workforces in, San Jose. This list includes Dow Jones Industrial Average (INDEX: ^DJI  ) components Cisco (Nasdaq: CSCO  ) , which is the city's second-largest employer and has its headquarters there, and IBM (NYSE: IBM  ) , San Jose's third-largest employer. With such a high concentration of technology talent, it shouldn't be surprising that San Jose has the highest median income of any city with over 280,000 people.

Buffett steps up
Warren Buffett's business acumen is legendary. It took a while for the New York Stock Exchange  (NYSE: NYX  ) to catch on, though. Berkshire Hathaway's (NYSE: BRK-A  ) (NYSE: BRK-B  ) stock wasn't traded on the Big Board until Nov. 29, 1988. That day, in the words of the Los Angeles Times, the "Omaha holding company run by billionaire takeover specialist Warren E. Buffett," first traded at an opening price of $4,750 per share, an investment "only [for] the thick-skinned, thick-pursed investor." The stock ended Nov. 29 at $4,700.

You probably know what happens next. In the 24 years following its "graduation," Berkshire's stock has grown at an annualized rate of 14.9%. Each of those $4,750 shares has been a 27-bagger for the thick-skinned and thick-pursed investors who've held on for this long.

Can Berkshire keep growing at such an impressive pace? Will Buffett ever change his mind about dividend payments? What lies in store for Berkshire after Buffett's gone? These questions, and others, will be answered in the Fool's premium research reports on Berkshire Hathaway. When you subscribe, you'll get a full year of updates, so you can stay on top of Berkshire's big moves. Click here to get your subscription now.

Read/Post Comments (1) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 30, 2012, at 1:48 PM, atarimuseum wrote:

    If you really want to find out all about Pong and Atari, there is a fantastic new book released just in time for the Pong 40th anniversary up on Amazon, its called:

    Atari Inc Business is Fun

    Has all of the stories on Atari from when it got started back in 1969 to its incorporation in 1972, the release of Pong. It has all of the full info on Steve Jobs time at Atari, far more than even the Steve Jobs book, including it has input from Steve Wozniak in that part of the book on Atari Breakout.

    Book is insane at 800 pages and nearly 300 of them are rare, never seen photos, memos and documents, this is a must read if you want to find out how the industry got started, read about the crazy high-tech culture of California or are a videogame fan and want to know everything there is to know about Atari.

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