Quote Originally Posted by CRV View Post
From what I understand, they made so many copies because that's what the retailers ordered, a point that never seems to come up. They didn't just make that many for the hell of it.
Actually the deal and the reason for all the carts was because the deal was made by Waner via Steve Ross. Atari originally approached MCA themselves and offered $1 million and were shown the door. Ross had been in the middle of a campaign to woo Spielberg over to Warner Brothers to make films, and decided to use the situation to sweeten the wooing. Ross did it himself over a weekend in East Hampton, flying Spielberg in for a "weekend party" and instead neogtiating the deal. Happened in July, it was for a guaranteed $23 million royalty to MCA/Spielberg, and Spielberg demanded it had to be out that Christmas.

Apparently the reason 4 million were produced was because that's how many they needed to sell to make a profit after the royalties, production costs, distribution costs, and advertising costs. According to Kassar, unfortunately of the 4 million sent out, 3.5 million were returned.

It's symbolic of the big problem at Atari Inc. during that time period - dual management. Warner's management often overrided Atari's and played an active part in setting up contracts, projects, etc. and dumping them on Atari. Stonic is certainly right, E.T. was more of a symptom of the crash and it's causes. The first signs of the crash started showing up publicly with the December '82 report which caused shockwaves through the industry and the market to briefly drop, forshadowing what was to come. Layoffs were actually started in January '83 already. Inferior games certainly added to the volatility of the market, but Atari's problems in those regards were more from Warner choosing to ignore Atari's overstocked warehouses (which were still counted as sold inventory for the year's reports) in order to continue to drive up Atari's value projections and in turn Warner's own stock for it's stockholders. Atari could have hunkered down and adjusted accordingly, but Atari was Warner's cash cow and they intended to milk it. Hence the mega-licensing movie deals that Atari had to foot the bill for as well. Atari even had a last chance with Morgan and his NATCO plan but Warner never game him a chance. As Atari was facing losses, so were they - and then a hostile takeover bid by Rupert Murdoch. Warner brought in an appraiser in January of '84 who recommended jettisoning Atari and some other loosing subsidiaries, and they began looking for buyers by that Spring behind Morgan's back. The Murdoch takeover was averted that March when they bought him out, and by July they were splitting up Atari. Morgan stated he had no idea about it until they called him over to a meeting room and there were Ross, Manny Gerard, Jack and Sam Tramiel and the required lawyers, at which point he was asked to put his signature on the transfer papers.

His NATCO plan wasn't a bad idea, it was a major trimming of the fat from the company along with employee investment similar to what wound up happening when Atari Games got bought out by the employees.