20
Putting the F in Fun

On August 10, 1968, the board of Fairchild Camera & Instrument named Dr. C. Lester Hogan the new president and CEO of the company, filling a vacancy dating back to the dismissal of Richard Hodgson that February. The head of the semiconductor business at Motorola, which he grew from a small operation to the second largest chip manufacturer in the world, he came in with a mandate to revitalize the Fairchild Semiconductor operation that had been providing most of the company’s profits for several years but was falling behind technologically as those profits were invested in other businesses. In a symbol of this new focus, Hogan moved FCI headquarters from Syosset, New York, to Mountain View, California, in the heart of Silicon Valley.1

Over the next two years, Hogan dismantled virtually all FCI’s businesses not related to the manufacture of solid-state components and electronics while pouring money into modernizing of Fairchild Semiconductor’s manufacturing facilities.2 While sales increased significantly as a result, the company failed to turn a profit initially as a recession devastated the semiconductor industry. Consequently, Fairchild proved unable to transition from bipolar circuits to MOS circuits, lost significant ground to its competitors, and began hemorrhaging cash.3 Although the company eventually returned to profitability, the failure to upgrade its product line marked the beginning of its long decline. In 1974, Hogan resigned as president due to lingering health issues from a botched operation several years before and turned the company over to his protégé Wilf Corrigan, one of seven Motorola employees dubbed “Hogan’s Heroes” who followed their boss from Motorola to take senior management positions at Fairchild.4 Corrigan followed the example of Texas Instruments and National Semiconductor to bring Fairchild into consumer electronics. By 1974, the calculator market was largely played out, so Corrigan focused on the latest consumer electronic fad: the digital watch.

Digital watch technology, in which the display is formed using solid-state components, was made possible by the invention at TI in 1962 of a special type of diode, the light-emitting diode, or LED, that generates light when a suitable voltage is passed through it. A decade of enhancement and miniaturization followed before the Hamilton Watch Company introduced the first electronic digital watch in 1972, which at $2,100 was prohibitively expensive for most people. As with the pocket calculator, however, consumer electronics and semiconductor companies knew it would be just a matter of time until digital watches dropped in price precipitously.5 Corrigan brought FCI into the field by purchasing a watch circuit startup called Exetron in 1975 to form the heart of a new consumer electronics division at the company.6 To run the new division, Corrigan tapped Greg Reyes, a 1962 graduate of Rensselaer Polytechnic Institute who worked at National Semiconductor and Motorola before following Corrigan to FCI in 1968. Before moving to consumer electronics, he had spent the last few years running Fairchild’s discrete electronics group.7

Fairchild released its first watches in July 1975.8 The next year, TI introduced its TI-500 LED watch sporting a plastic case allowing it to retail for only $20. As in calculators, a race to the bottom on price developed that destroyed most of the companies in the business.9 By 1976, FCI was the second-largest digital watch producer behind TI,10 but consumers were already tiring of them, leading to massive overstocks at Christmas and deep discounts at the beginning of the next year. When TI subsequently cut the price of its cheapest watches to $10 in spring 1977, the opportunity for FCI to make money in the business had passed.11 By then, Fairchild had already embraced the latest hot consumer electronic product: the video game.

***

In 1976, an estimated 3.2 million dedicated video game consoles were sold in the United States as the demand for Pong-style games continued unabated from the previous year.12 For a variety of reasons, this represented only around one-third of consumer demand. General Instrument struggled all year to produce sufficient quantities of its industry-leading AY-3-8500, particularly after a November strike at its main manufacturing plant. Sales were further hampered when prominent Japanese OEM electronics manufacturer Systek entered bankruptcy late in the year and could not supply product to its American partners, most notably the electronics importers Lloyd’s and Unisonic.13 Additionally, several U.S. firms that planned to release a system in time for the holidays were hampered by a failure to receive FCC approval for their hardware. If not for these factors, analysts believed the market could have absorbed as many as 10 million units. Faced with such overwhelming consumer interest and analyst estimates of another 7–10 million in sales for 1977, the leading companies in the business – Coleco, Atari, and Magnavox – each readied a new line of dedicated consoles for the next holiday season alongside a host of smaller companies.

As the Telstar only played three of the six games present on the GI AY-3-8500 chip, Coleco focused on new variants incorporating different sets of games. Because of the success of that first product, the company decided to market all these new variations under the Telstar name.14 The primary model for the year was the Telstar Alpha, which added a squash game called Jai-Alai to the lineup of the original system and retailed for just $40. Coleco also released a color version of the Alpha called the Telstar Colormatic for $50 and a deluxe model called the Telstar Ranger that shipped with two detachable controllers as well as a separate light gun to play the two target shooting games on the AY-3-8500 chip for $60. Finally, Coleco deployed its first four-player unit, the Telstar Galaxy, which retailed for $60 and could play eight games in full color.15

Magnavox, meanwhile, abandoned its custom chip designs from the previous two years and embraced the GI chip line with three new systems, the Odyssey 2000, 3000, and 4000. Both the 2000 and 3000 used the AY-3-8500 chip like the Odyssey 300 the year before but added the Squash game on the chip to the tennis, hockey, and practice mode games found in the earlier system. While both the 2000 and the 3000 shipped with the same games, they featured different controllers, and only the 3000 included difficulty settings to adjust ball speed, paddle size, and ball angle. The 4000 incorporated the new AY-3-8600 that added another four ball-and-paddle games including basketball and gridball. It also featured color graphics.

While Coleco and Magnavox concentrated on exploiting GI chips in 1977, Atari forged ahead with its own designs. These included Ultra Pong and Ultra Pong Doubles systems that featured 16 ball-and-paddle variants for two or four players, respectively, as well as more innovative systems like Video Pinball. Retailing for $99, Video Pinball may have been the most sophisticated dedicated console yet produced, as it incorporated RAM memory in order to feature several pinball-like games in which the targets could change color and a port of the hit arcade game Breakout.

With a diverse array of new systems coming to retail, the market for 1976 models collapsed. By spring 1977, systems that retailed for $70–$80 the previous holiday season could be found for half that price as retailers cleared old stock in anticipation of newer models. Concern began to grow that the video game business might soon follow the calculator and watch businesses that started out so promising but fell apart in relatively short order.16 The obvious solution was to develop more sophisticated games with more interesting gameplay than Pong, but moving beyond ball-and-paddle and simple target shooting games proved tricky due to increasing complexity straining the limits of LSI circuits. The first company to try was URL, still hanging in the market with its Video Action series despite generally lackluster sales. In late 1976, the company released a system called Indy 500 that added two new driving games to the tennis and hockey games from its Video Action III console released earlier in the year after the Video Action II had to be taken off the market for failing FCC testing.17 Indy 500 combined the discrete circuits of Video Action III with the new driving mechanics on a two-chip set mounted on a single substrate produced by chip manufacturer Omnetics. The promise of home driving games spurred orders from several major department stores of around 60,000 units, but the chip proved difficult to manufacture, yields were low, and URL could not bring the system to market in sufficient quantities for the holiday season. In mid-1977, the company filed for bankruptcy.18

GI attempted to address the variety problem by releasing a new line of chips in 1977 that each played a set of games derived from the latest hits in the arcade. These included its new Pong chip, the AY-3-8600, that played eight ball-and-paddle games and two target shooting games; Roadrace (AY-3-8603), which played a series of driving games; Submarine (AY-3-8605), which played target shooting games similar to Midway’s Sea Wolf; Wipe-Off (AY-3-8606), which played variations of Breakout; Tank Battle (AY-3-8700), which played variations on Tank; and Cycle (AY-3-8760), which played variations of a 1975 Atari coin-op game called Stunt Cycle that tapped into the popularity of daredevil motorcyclist Evel Knieval by challenging the player to jump a motorcycle over a group of cars.19

In the United States, the only significant company to adopt the new wave of LSI chips from GI and its competitors was Coleco. In addition to producing its line of ball-and-paddle games, the toy company also continued its relationship with Ralph Baer by entering into a development contract with Sanders Associates. Baer assembled a small team led by a co-worker named Dunc Withun that helped Coleco develop three of its systems, the Telstar Alpha and two non-ball-and-paddle products.20 The first, Telstar Combat, was powered by the AY-3-8700 chip from GI that played four variants of the hit arcade game Tank and replicated the dual joystick controls of that game.21 The second system, the Telstar Arcade, took advantage of a chip from GI competitor MOS Technology called the MPS-7600 that came in four variations that each played a different ball-and-paddle, driving, and target shooting game. The system itself is a triangular base unit with a different control scheme on each side – paddles, a steering wheel, and a light gun – into which one of four triangular cartridges can be inserted. Each cartridge contains a different MPS-7600 variant sporting three games. The first shipped with the system, which retailed for $79.99, while the other three sold separately for $25 each.22

While GI and Coleco focused on a hardware-based cartridge solution, a small Connecticut company called the Alpex Computer Corporation focused on a software solution instead. Alpex founder Norman Alpert worked as an engineer at an AMF R&D facility in Stamford, Connecticut, until the bowling company decided to move it North Carolina in 1969. Not wanting to relocate, Alpert and several other engineers at the facility formed Alpex in Stamford and entered into a partnership with mailing-equipment company Pitney Bowes to develop an electronic cash register system. That partnership fell apart in 1973 as larger companies like IBM and NCR entered the field, forcing Alpert to lay off most of his staff and leaving his company in desperate need of a new product. Fellow AMF alum William Kirschner believed Alpex should enter the video game business.23

Kirschner received approval to start a video game project in early 1974, which he decided should incorporate a microprocessor. He hired a former co-worker at AMF and Alpex named Lawrence Haskel to program the software for the system, which they dubbed Remote Access Video Entertainment, or RAVEN. Haskel, an avid video game player since seeing a Magnavox Odyssey demonstration unit in a department store, programmed a ball-and-paddle hockey variant, a tic-tac-toe game, a simple target shooting program, and an art program that allowed the player to draw lines on the screen. As the game library increased, Kirschner and Haskel realized interchangeability would be ideal. Inspired by their Intel 8080 development kit and its erasable-programmable read only memory (EPROM) chips, they decided to house each game on a ROM attached to a circuit board with a sturdy pin connector that could interface with the microprocessor system.24

Once the duo had a prototype in place, they shopped the system around to television manufacturers Sylvania, Zenith, RCA, and Motorola, all of which turned them down. They decided to pivot to semiconductor companies next since they were beginning to launch their own consumer products divisions and approached a contact at Fairchild who used to supply them with parts. The contact passed their info to Greg Reyes, who thought the system might have merit. Reyes sent a team to Stamford to evaluate RAVEN led by former Novus general manager Gene Landrum and a Fairchild engineer named Jerry Lawson.25

Born December 1, 1940, and raised in Queens, New York, Gerald Anderson Lawson began experimenting with amateur radio when he was 13 and started making house calls to repair TVs at 16. After attending Queens College and City College of New York, Lawson worked at several East Coast defense contractors before taking a job with Kaiser Electronics in Palo Alto. Around 1970, he moved on to Fairchild as a field engineer helping other companies integrate Fairchild products into their designs.26 Lawson took an interest in video games after seeing Computer Space and getting to know the Atari engineers as they worked on Pong.27 When Fairchild deployed its first microprocessor, the F8, in 1975, Lawson built his own coin-operated game around it in his garage to prove that a microprocessor could drive a display.28 Called Demolition Derby,29 the game attracted interest from a small local coin-op company called Major Manufacturers that placed it out on test in a pizza parlor and may have exhibited it at the 1975 MOA, but Major folded and the game never received wider distribution.30 When Fairchild learned that Lawson had created the game, he was tapped to lead its evaluation of the Alpex home video game project.31

After viewing the prototype, Lawson helped Kirschner and Haskell make changes to its design, most notably by swapping out the 8080 microprocessor for a Fairchild F8. He also worked to simplify the control scheme. The prototype used a keyboard due to the complex hockey game, which allowed the players to move their paddles in all four directions and change the angle as well. To condense these functions into a game controller, Lawson created a thumbstick that could be pushed in four directions, rotated like a dial, and pressed like a button. Meanwhile, Gene Landrum wrote a marketing report delivered to Fairchild in November 1975 called “Business Opportunity Analysis: Alpex Video Game” advocating a move into the video game space. Impressed by the report, Greg Reyes officially brought Fairchild into the business.32

Fairchild announced its deal with Alpex in February 1976, which gave Fairchild the exclusive rights to market a video game based on the company’s technology for four years.33 By now, Lawson was hard at work alongside an industrial engineer who used to work for National Semiconductor named Nicholas Talesfore to define the form factor of the console. During this process, they confronted a serious problem: they had no idea how to allow for the insertion and removal of cartridges. While removable ROM had been gaining traction for industrial applications, there had never been a consumer product designed to swap out ROM memory chips, and the implications of constantly plugging and unplugging them into a circuit board had never been seriously explored. The Fairchild team needed to develop a system that allowed for easy insertion and removal while protecting the connectors and avoiding surges that might fry the entire system.34

To solve these problems, Talesfore turned to one of his former co-workers at National Semiconductor named Ron Smith. Smith developed a solution consisting of a special connector on the motherboard sporting flexible metal pins that would rotate to connect with gold-plated contacts on the game circuit board, after which a separate locking mechanism would hold the cartridge in place so it could not be jostled loose and break the connection. To protect the electronics on the circuit board from physical harm, Talesfore created a bulky plastic housing inspired by 8-track cassette tapes.35 With the insertion problem solved, Talesfore finished the outer casing of the console, which he designed to look like a high-end stereo component, in time to debut what Fairchild was now calling the Video Entertainment System (VES) at the June 1976 Consumer Electronics Show (CES).36

Midway through the CES show, Jerry Lawson departed to bring the system to the FCC for testing. It promptly failed. What followed was a multi-week ordeal to shield the hardware sufficiently to pass the test, which in turn required constant changes to the assembly line as the hardware underwent a series of minor tweaks and modifications.37 Fairchild had hoped to begin shipping systems to dealers in August but did not receive FCC approval until late October.38 The process also delayed the completion of the first games for the system: Fairchild had planned to ship three games at launch, but in the end could only manufacture one in sufficient quantities for the holidays.

Fairchild finally launched the VES in late November 1976 at a price of $150. The release started with a limited rollout in JC Penny and Montgomery Ward department stores serving select markets before expanding to roughly 40 markets before the end of December.39 Two games were built into the system, Tennis and Hockey, while six additional games were sold on three cartridges, which Fairchild called Videocarts. Videocart-1, the only one to make it into stores in quantity,40 contains four simple games: Tic Tac Toe, a one paddle ball-and-paddle game called Shooting Gallery, a drawing program called Doodle, and a drawing variant called Quadra-Doodle in which the machine itself creates the patterns. Videocart-2 features a Tank clone called Desert Fox and the same Shooting Gallery found on Videocart-1, while Videocart-3 contains a Blackjack game. While the system was generally well received, Fairchild could only manufacture the system in limited quantities due to the FCC testing delay and sold just 40,000 units before the end of the year.41

In 1977, the VES received a new name, the Channel F,42 and rose in price to $170 due to increased manufacturing costs related to passing the FCC test. The company also worked diligently to develop new games. Since the system had to be sold essentially at cost due to the FCC situation, Fairchild would have to realize virtually all of its profits from software. In January 1977, the number of available Videocarts doubled to six.43 Two of the new games, Spitfire and Space War, are one-on-one dueling games. Spitfire is based on Jet Fighter and sports a primitive AI for one-player action. Space War bears little resemblance to its namesake as two players fight to deplete each other’s energy, which can be recharged by visiting a starbase located in each corner of the screen. The third new game, Math Fun I, is an educational cartridge with basic addition and subtraction problems. Four more cartridges were released over the summer: Math Fun II with multiplication and division problems, Magic Numbers with variants of Mastermind and Nim, Drag Race, and Baseball. By the holidays, 12 cartridges were available with the addition of Backgammon/Acey Ducey in October and Maze in November 1977.44

As Fairchild began pushing its video game system heavily, its digital watch business began to fall apart. Although Fairchild remained the number two watch company in the United States in 1977, it began losing millions of dollars on watches every quarter as profitability evaporated across the entire category. In response, Wilf Corrigan split the Consumer Products Group into two separate division reporting directly to him. The Time Products Division took over the digital watch business and continued to limp along until it was closed in 1979 without ever turning a profit. Former Consumer Products Group Vice President Greg Reyes took charge of the Video Games Division, which did a brisk business in the early part of 1977. Despite what looked like a solid market, however, Corrigan and Reyes opted for a conservative production run so as not to be caught with excess inventory in the event of a market downturn like the one they experienced in the watch business.45

***

At the beginning of 1977, Fairchild faced its first competitor in the programmable console space: consumer electronics giant RCA. Once the undisputed leader in television technology, RCA entered a period of decline in the 1960s as long-time company leader David Sarnoff slowly ceded control to his son Robert, who became president in 1965, CEO in 1967, and finally added the role of chairman in 1970 after the elder Sarnoff retired. Like Charles Bludhorn at Gulf & Western, Robert diversified his company through conglomerating, acquiring companies as disparate as book publisher Random House, car rental company Hertz, rug maker Coronet, and food processing operation Banquet Foods. He also expanded the company’s efforts to challenge IBM in the mainframe computer space, a disaster that cost RCA $490 million in write-offs when the computer division closed in 1971. With profits in decline due to these missteps, Robert Sarnoff was ousted by the board of directors in 1975.

The closure of the computer division did not end RCA’s research into computer technology, as it retained a sizable semiconductor division and its extensive R&D operation in Princeton, New Jersey. Indeed, with the end of development on mainframe computers, the engineers who had been working on these products for the last few years were able to refocus their efforts on the exciting new technological breakthroughs being achieved in integrated circuits. One of these engineers, Joseph Weisbecker, felt that ICs were becoming complex enough to power low-cost computers devoted to education and entertainment and dedicated himself to bringing RCA into the emerging video game business.

Joseph A. Weisbecker was born on September 4, 1932, in Audubon, New Jersey. Interested in electronics from an early age, he constructed his own tic-tac-toe-playing computer in 1951 while still in high school. After finishing his electrical engineering degree at Drexel University in 1956, he became a key member of the team that designed RCA’s earliest mainframe computers. Weisbecker was particularly interested in uses for electronics in education, so in 1964 he invented a cheap plastic toy marketed as Think a Dot that introduced basic computer concepts and became a big hit that sold over 500,000 units.46

Before shutting down its computer systems division, RCA made one last effort to save it by moving everyone to new facilities in Marlboro, Massachusetts in 1969. Uninterested in moving to New England, Weisbecker realized that remaining employed as an engineer by RCA in New Jersey would require being hired by the RCA Labs R&D division, so he began brainstorming potential projects he hoped would capture the attention of one of the managers there. His ultimate goal was to use any project that the company took on as a Trojan horse to keep RCA in the computer business.47

Figuring RCA would continue its integrated circuit business for at least a few years despite the end of its computer work, Weisbecker built a prototype personal computer system constructed from TTL hardware called FRED – short for Flexible Recreational Educational Device – and began showing it to colleagues. The project caught the attention of the manager responsible for integrated circuit projects at RCA Labs, Jerry Herzog, who hired him in 1970 and suggested they work together to incorporate the basic functionality of FRED into a microprocessor. Herzog further suggested they use a relatively new chip fabrication process RCA had played a key role in pioneering called complementary metal-oxide-semiconductor (CMOS) that was becoming an industry standard because transistors fabricated using the process consumed far less power – and therefore also generated far less heat – than standard MOS components.48 Herzog and Weisbecker completed a two-chip version of the FRED system dubbed the 1801 in 1975, after which other engineers in the labs consolidated all the functionality onto a single microprocessor, the 1802, in 1976.

As the 1802 project gained support within RCA, Weisbecker continued his own work at home to create a low-cost computer system based around the chip. Uncertain what division of the RCA conglomerate might ultimately take an interest in the system, Weisbecker tinkered with multiple FRED configurations with a variety of recreational and educational uses. He then launched a two-pronged assault to generate enthusiasm within the company by bringing these designs into the Labs so that his co-workers could play around with them while publishing articles on his hardware in professional and hobbyist journals.49 Weisbecker and his colleagues could not convince the RCA consumer products division to bring FRED to retail, so they explored bringing it to the arcade through a coin-operated version that replaced cassette tapes with ROM cartridges. While some of the games created for the system, such as a one-on-one fencing game, were imaginative for their day, they were ultimately too simple to appeal to the arcade market.50

In 1976, RCA’s Distributor and Special Products Division agreed to market a version of FRED for home use that accepted ROM cartridges, which was originally designated the Home TV Programmer before taking the name Studio II.51 A new set of games was developed for the system, most of which were programmed by a new hire named Andy Modla. Weisbecker’s daughter, Joyce, also contributed a couple games as an independent contractor. RCA hoped to have the system on the market in time for Christmas 1976, but engineering and production delays forced the company to adjust its release schedule.52

The RCA Studio II debuted in February 1977 at $150 through a test market in four cities, Oklahoma City, Indianapolis, Spokane, and Portland, Maine. Encouraged by the results of the test, RCA expanded to 19 markets in March and went nationwide by June.53 Four programs were built directly into the system, Addition, Bowling, Doodle, and a driving game similar to Speed Race called Freeway. Three additional games were available at launch on cartridges: Space War, a simple target shooting game for one or two players completely different from both the PDP-1 classic and the Channel F game of the same, and two more educational cartridges called TV Schoolhouse 1 and Fun with Numbers.54 By the middle of the year, two more cartridges were added: Pong clone Tennis/Squash and Baseball.55 TV Schoolhouse II and Blackjack arrived in September.56

While FRED had been ahead of its time in the mid-1970s, the Studio II could not claim the same distinction in early 1977. Like all previous FRED prototypes, the system featured only black-and-white graphics rather than the full color of the Channel F, while it also betrayed its computer roots through an awkward keypad control system built directly into the unit rather than the detachable paddle and joystick controllers becoming common on both dedicated and programmable systems. As a result, the Studio II appeared unable to mount a credible challenge to the Channel F. Fairchild’s first real competitor appeared later in 1977, when leading video game company Atari finally brought its own programmable game to market.