Four programmers leave Atari and invent third-party publishing

What happened

David Crane, Larry Kaplan, Alan Miller and Bob Whitehead had written a large share of the console's best-selling titles and were paid as staff engineers, with their names kept off the packaging. Meetings with management about recognition and a share of revenue went badly, and the version most often recounted has an executive comparing them to interchangeable assembly workers. They left with Jim Levy, who came from the record business and structured the new company accordingly, naming and photographing designers on the boxes like recording artists.

Atari sued, arguing that former employees were using trade secrets to make cartridges for hardware it owned. The case settled in 1982 with Activision paying royalties, an outcome that established something important: a company could publish for someone else's console, and the platform holder's remedy was a license rather than exclusion. Activision's games were frequently better than Atari's, which made the argument commercially as well as legally. Every publisher on every console since operates in the space that settlement opened.

The world at the time

Cartridge consoles in 1979 were understood as appliances whose games came from the manufacturer, exactly as with a dedicated ball-and-paddle box. Programmers worked alone or in pairs, often writing an entire title themselves, and received a salary. No trade press profiled them, no credits appeared on screen, and no precedent addressed whether an outsider could make software for hardware it did not own.

What it changed

Dozens of publishers followed within three years, some competent and many not, and the resulting flood of cartridges was among the causes of the 1983 collapse. Nintendo drew the opposite lesson and built licensing control into its hardware. Activision itself survived the crash, moved onto computers, and became one of the largest publishers in the world.