26
Power in the Palm of Your Hand

In 1936, a young couple from Denver, Colorado, moved to California to seek their fortune. Ruth Mosko, the youngest of ten children of Polish immigrants, took a job as a stenographer with Paramount Pictures. Her boyfriend, Isadore “Izzy” Handler, an aspiring artist whom Ruth met in 1932 at a dance when they were both 16 years old, followed her to enroll in the Art Center School in downtown Los Angeles. Though her family disapproved of the match, Ruth married Izzy in 1938 and subsequently convinced him to start going by his middle name, Elliot.¹

Elliot found a job designing light fixtures to put himself through school, where he learned about new plastics like Lucite and plexiglass. Intrigued by the materials, he began building Lucite furniture in his spare time to fill his and Ruth’s apartment. Ruth felt the furniture was of high enough quality to sell and convinced her husband to drop out of school and quit his job so they could manufacture furniture under the name Elliot Handler Plastics. Elliot built the products, and Ruth sold them.²

Elliot later branched out into giftware and then costume jewelry, attracting the attention of a prominent Los Angeles jeweler named Zachary Zemby. The duo formed a partnership called Elzac in 1941.³ Elliot led design efforts, while his friend Harold “Matt” Matson, the shop foreman at his old lighting fixture company, ran manufacturing. Wartime shortages created challenges, and Elliot began having disagreements with Zemby and three new investors brought in by his partner. Matson grew sick of the infighting and left in 1944.⁴

¹ Ruth Handler and Jacqueline Shannon, Dream Doll: The Ruth Handler Story (Stamford, CT: Longmeadow Press, 1994), 21–33.

² Ibid, 35–41.

³ Ibid, 41.

⁴ Ibid, 57–58.

Ruth, meanwhile, had given up sales for motherhood after the birth of her daughter Barbara in 1941. Anxious to get back into business, she visited Matson after he quit Elzac. Elliot, Ruth, and Matt agreed that Matt could build picture frames based on old designs by Elliot and sell them in partnership with Ruth. Although Elliot himself would remain at Elzac, the trio named the new company by combining letters from “Matt” and “Elliot” to spell Mattel. As tensions increased at Elzac, Elliot let Zemby and his other partners buy him out in 1945 so he could join Matt and Ruth at Mattel.⁵

Before long, Elliot began combining leftover wood from the frames with plastic scraps to construct dollhouse furniture, thus bringing Mattel into the toy business.⁶ Although profitable in its first year, the company hit a snag in 1946 when a competing company put out a more detailed line of doll furniture that drove Mattel out of the business. In 1947, the company experienced its first hit with a plastic toy instrument called the “Uke-A-Doodle,” but once again, another company introduced a competing product at a lower price. Although Mattel weathered the crisis, the constant financial worries were too much for Matson, who sold his share in the business to Ruth’s sister.⁷ The next year, the company experienced another hit with a plastic piano and incorporated as Mattel, Inc.

Mattel continued as a moderately successful toy company until 1955, when the Handlers took a risk that transformed the entire industry. In the early twentieth century, the toy business was strictly seasonal with products bought almost exclusively around Christmas, so firms spent virtually no money advertising their products. The rise of television in the early 1950s created both opportunities to create tie-in products with popular programs as well as the prospect of peddling toys directly to children year round through commercials.

In 1955, the television network ABC approached Mattel with an offer to sponsor a 15-minute segment of the new “Mickey Mouse Club” show from The Walt Disney Company for 52 weeks in exchange for $500,000. That figure represented virtually Mattel’s entire net worth, but the Handlers decided to accept the offer and worked with the Carson/Roberts advertising agency to create a commercial for a new automatic cap gun called the “Burp Gun.” Backed by the commercial, the gun set a new annual sales record and helped usher in a new era of television promotion and year-round sales for the toy industry.⁸ Mattel expanded its line of guns over the next two years to take advantage of the popularity of TV westerns, and sales reached $14 million by 1959. The company’s biggest hit was yet to come.

⁵ Ibid, 58–61.

⁶ Ibid, 61.

⁷ Ibid, 66–70.

⁸ Ibid, 83–86.

On a family trip to Europe in 1956, the Handlers encountered a German novelty doll called Lilli based on a German comic strip character known for her loose morals, skimpy clothing, and gold-digging schemes. While dolls had been a fixture of the toy industry for decades, they were typically sculpted as babies or small children, and play centered on childcare and motherhood. Indeed, Lilli herself was intended not for children to play with, but for adults to exchange as a gag gift. Ruth Handler saw something more. When her daughter Barbara was younger, Ruth noticed she enjoyed pretending her paper dolls were teenagers or adults rather than young children and saw an untapped market for a teenage plastic doll. When she asked her designers to craft such a doll, they said it could not be done for technical reasons. Now armed with Lilli, she ordered them to try again. The result was a teenaged doll supported by a line of clothing and accessories released in 1959 called Barbie.⁹

An instant smash success, the Barbie line transformed Mattel into the number one toy company in the world and paved the way for a public offering in 1963. With sales reaching $100 million by 1966, Ruth Handler felt that delivering further growth for the shareholders would require both increased toy production and diversification outside the toy business. To further these goals, the Handlers hired Seymour Rosenberg, one of the most respected acquisition specialists in the country, as executive vice president and CFO.¹⁰

Rosenberg spearheaded the acquisition of five companies between 1968 and 1971 under the banner of the “World of the Young” initiative designed to take Mattel beyond toys into other forms of children’s entertainment. This brought the company into pet products (Metaframe), playground equipment (Turco), magnetic tape production (Audio Magnetics Corp.), the motion picture industry (Radnitz/Mattel Productions), and theme parks (Ringling Brothers and Barnum & Bailey Circus, which was building Circus World in Florida). Meanwhile, the company realized another monster toy hit in 1968 with its line of Hot Wheels cars and posted five straight years of record earnings to close out the 1960s.¹¹

⁹ Ibid, 1–12. Barbie was named after Barbara Handler. Barbie’s boyfriend, introduced in 1961, was named after Elliot and Ruth’s son Ken.

¹⁰ “Mattel Tells Troubles in Toyland,” The Milwaukee Journal, November 17, 1975.

¹¹ Ibid.

After two years of brisk sales, interest in Hot Wheels started to fade in 1970. A September fire at a Mexico plant further stunted growth, so while Mattel remained profitable, the company was poised to miss its earnings targets and fall short of record profits for a sixth straight year. To compensate, executives at Mattel booked future orders as revenue to deliver another year of record results and inflate the company stock price.¹² As the Hot Wheels line took another sharp dip the next year and a West Coast shipyard strike prevented Mattel from delivering much of its inventory onto store shelves for the 1971 Christmas shopping season, the company recorded the first annual loss in its history.¹³

Mattel’s spate of acquisitions made it difficult for the Handlers to manage the company effectively, so in 1969 they initiated a three-year plan to divisionalize.¹⁴ This process culminated in 1972 with the formation of an operating committee consisting of CEO Elliot Hander, President Ruth Handler, and four senior vice presidents: Arthur Spear, Ray Wagner, John Jones, and Robert Ehrlich, who replaced the retiring Rosenberg as CFO. A new Mattel Toys subsidiary was also formed with Ruth Handler as president, Spear as EVP of operations, Wagner as EVP of marketing, and Ehrlich as CFO.¹⁵ Mattel Toys was further subdivided into four divisions: toys, dolls, wings and wheels, and games.

Restructuring Mattel resulted in increased overhead costs, and losses continued to mount in 1972 as several of Mattel’s recently purchased subsidiaries proved unprofitable. Nevertheless, Mattel issued a press release in February 1973 stating it had turned a corner and was poised for recovery. Three weeks later, the company was forced to issue a correction stating that it would record another loss in fiscal 1973 and that the earlier release should be disregarded.¹⁶ This strange behavior prompted both a class-action lawsuit by shareholders and an SEC investigation, after which years of inventory manipulation came to light.

For the next two years, Mattel was consumed by legal struggles. Responsibility for navigating this crisis fell to Arthur Spear, an MIT-educated engineer who joined Mattel in 1964 to run manufacturing. He became president of the company in 1973 when the Handlers resigned all their executive positions save for co-chairmen of the board as they came under investigation for the financial irregularities.¹⁷ Spear managed to clear the company’s short-term debt and restructure its long-term debt.¹⁸ He also sold several non-profitable and/or debt-ridden divisions like Audio Magnetics,¹⁹ Turco,²⁰ and the Ringling Brothers Circus.²¹

¹² Handler and Shannon, 1994, 162–163.

¹³ “Mattel Reports First Loss in History,” Playthings, May 8, 1972, 19.

¹⁴ Handler and Shannon, 1994, 134–135.

¹⁵ “Mattel Revamps Structure, Establishes Toy Division,” Playthings, September 1972, 35.

¹⁶ Handler and Shannon, 1994, 167.

¹⁷ “Mattel Lists Major Shifts in Officers,” Playthings, May 4, 1973.

¹⁸ “Business and Finance,” Toy & Hobby World, March 1975, 30.

¹⁹ “Mattel Agrees to Sell Audio Magnetics,” Toy & Hobby World, August 20, 1973, 10.

²⁰ “Mattel Closes Sale of Turco,” Toy & Hobby World, February 4, 1974, 26.

²¹ Peter Fiero, “Gulf Oil Subsidiary to Buy Circus World,” Lakeland Ledger, January 23, 1974.

In August 1974, Mattel signed a consent decree with the SEC requiring the appointment of additional outside directors, only to suspend trading on the New York Stock Exchange the next month when the extent of the financial transgressions became evident. A second consent decree followed in October in which enough outside directors were appointed to constitute a majority. In October 1975, the Handlers resigned from the board, severing their last significant ties to the company they founded.²² Less than a month later, Mattel settled its shareholder suits for $30 million.²³ With its reputation ruined and its finances in tatters, Mattel needed a hit desperately, and the electronic game market just beginning to coalesce around Atari’s Home Pong seemed like a promising avenue to help turn the company around.

***

The rise of the home video game proved a challenge for the toy industry. While nominally within its purview as an entertainment product popular with children, a video game was both more expensive than a typical toy and built upon technology outside the comfort zone of the typical toy buyer. As a result, early video games were just as likely to be found in sporting goods and electronics departments as mixed in with other toys.²⁴

This situation began to change when Coleco entered the industry with its Telstar line. As an established toy company, Coleco already did most of its business through toy department buyers, so it continued to rely on them when marketing its video games. New Magnavox video game product manager John Helms, who took over from Bob Fritsche in November 1975,²⁵ also courted toy buyers by bringing the Odyssey product line to Toy Fair in 1976 as he looked to continue expanding distribution out of the exclusive Magnavox dealer network.²⁶ While video games remained split between multiple departments that year, it was clear they would play a significant role in the future of the toy industry.

²² “Mattel Elects A.S. Spear; Meason is Named President,” Playthings, September 1978.

²³ “Mattel to Settle Lawsuits Out of Court,” Playthings, December 1975, 15.

²⁴ Milton Schulman, “Toy Industry Enters Electronic Age; Promising Market is Still Unshaped,” Toy & Hobby World, September 1976, 1.

²⁵ “Trade Personals,” Weekly Television Digest with Consumer Electronics, November 24, 1975, 12.

²⁶ “Video Games Sweeping Toy Field,” Weekly Television Digest with Consumer Electronics, February 23, 1976, 9.

Even as toy buyers became comfortable with a higher priced product, designing the games remained beyond the expertise of most toy companies, and the risk of failure with such an expensive offering proved daunting. As the price of LSI circuits began to fall, some of these firms saw an opportunity to create simpler games that retained the high-tech allure of the video game while retailing at a more traditional price point. This approach was particularly favored by the major players in board games, as well as by the severely wounded Mattel. By 1978, non-video electronic games developed by these companies would become so popular that it appeared they might supplant video games entirely.

While Art Spear navigated Mattel through its legal and financial difficulties, Ray Wagner, who became president of Mattel Toys in 1972,²⁷ and his marketing vice president, Ed Hamowy, attempted to keep the company relevant in its core business. Part of their strategy to combat flagging sales of its key toy lines was to hire new managers out of the traditional packaged goods business who could jump-start product development and marketing. One of these new hires was a young marketing executive named Michael Katz.

A graduate of Cornell University with an MBA from Columbia, Katz spent time in product marketing and brand management with companies like Lever Brothers and Foremost Foods. He then took an account manager role at the McCann Erickson ad agency in San Francisco but grew unhappy in the role. A headhunter recruited him to Mattel as director of new product category marketing, where his mandate was to explore new product categories and introduce products in areas where the company had not previously been successful. Games were a traditional weak spot for Mattel, and pocket calculators had become ubiquitous over the last few years, so during a brainstorming session Katz asked the head of electronics development at Mattel Toys, Richard Chang, to create a calculator-sized electronic game using LEDs.²⁸

²⁷ “Mattel Lists Major Shifts in Officers,” 1973.

²⁸ Michael Katz, interview with the author, August 1, 2014.

Chang responded to the challenge by developing a simple obstacle avoidance concept in which parallel strips of red LEDs light up in sequence to simulate movement from top to bottom or side to side. The player controls his own LED that can move between strips to avoid the oncoming lights. Chang worked with a graphic designer named David James to theme this setup around several activities including baseball, auto racing, and football. Focus groups indicated that football held the greatest appeal, but Mattel management decided to develop the auto racing concept first because Chang was continuing to make refinements to the hardware that would be beneficial to the football concept.²⁹ To develop the LSI required to power the final product, Chang approached Rockwell International, a conglomerate with a chip design operation in Southern California. Rockwell assigned an engineer named Mark Lesser to the project, who converted one of Rockwell’s existing calculator chips to meet the needs of a game and programmed the racing theme in the 511 bytes of memory available to him on the chip.³⁰

In fall 1976, Mattel Toys hired a marketing executive named Edward Krakauer as VP of New Business Development, further strengthening a team the company hoped would put Mattel back on track.³¹ Like Katz a veteran of the food products industry, where he was vice president of consumer products marketing for Hunt-Wesson, Krakauer took over the marketing of the handheld line in February 1977 as the head of a new Mattel Electronics unit.³² Results were not promising at first. Mattel offered a first look at its Auto Race and Football games at the January 1977 Consumer Electronics Show, but the industry was skeptical of the products, in large part because Mattel had never been successful in games. Krakauer tried again at the June CES, where alongside Auto Race and Football he showed a third game called Missile Attack that changed the Auto Race format so that the player attempted to collide with approaching LEDs to simulate shooting down missiles launched at New York City.³³ Once again, he was unable to generate much enthusiasm.

Despite the lackluster reception, Mattel secured parts for 500,000 units and prepared a massive fall advertising campaign. Auto Race arrived first in May 1977 and underperformed, causing Sears to significantly cut back on its orders for the whole line and forcing Mattel to halt production at 100,000 units.³⁴ Another blow came when the NBC television network refused to air commercials featuring Missile Attack because it thought children might believe that if they failed at the game, New York City would actually blow up.³⁵ Once Football debuted, however, it proved a hit during the Christmas season.

²⁹ Katz, 2014.

³⁰ Scott Stilphen, “DP: Interviews Mark Lesser,” Digital Press, 2007, http://www.digitpress.com/library/interviews/interview_mark_lesser.html.

³¹ “People,” Playthings, October 1976, 95.

³² “Trade Personals,” Weekly Television Digest With Consumer Electronics, February 21, 1977, 12.

³³ “Mattel’s Missile Attack Viewed at Chicago Electronics Show,” Playthings, August 1977, 31.

³⁴ “Trivia and Stories,” Handheld Museum, accessed June 11, 2019, https://www.handheldmuseum.com/Mattel/Trivia.htm. Several sources have Auto Race coming out in 1976, but this appears unfounded. The toy trades indicate the game was displayed for the first time at the January 1977 CES, and ads for the game did not start appearing in newspapers until May 1977.

³⁵ Missile Attack was pulled and reworked as a science fiction title originally called Space Alert and ultimately rebranded as a licensed tie-in with the new TV series Battlestar Galactica in 1978.

In 1978, Mattel sold over 1 million units of Football.³⁶ Another Mattel handheld introduced that year, Basketball, also topped a million units. These successes occurred despite fierce competition with the former leader of the dedicated video game console market, Coleco. After its disastrous 1977 holiday season, Coleco cancelled most of its video game development, but prepared to move forward in the same electronic handheld market as Mattel. Leading these efforts was the company’s new head of electronic game development, Eric Bromley.

A philosophy graduate of Syracuse University, Bromley was teaching logic at Utica College in New York when the first solid-state games entered the arcade. Looking for something more lucrative than a philosophy teaching gig, Bromley followed the advice of a colleague and used his logic knowledge to create an electronic dart game and attempted to sell it as a coin-operated product. While the game was not successful, Bromley parlayed the experience into a job at Midway Manufacturing working on coin-operated games.³⁷

Bromley joined Coleco in 1976 when the Telstar was nearing completion and became one of the primary designers for the company’s growing electronic game line. After Mattel debuted its Football game, he started work on his own version that included several enhancements, most notably the ability to throw passes. Coleco planned to market the game exclusively through Sears, but during a demonstration of the prototype unit an executive tripped over and broke it, and Sears declined to buy. Coleco released the game under its own label in 1978 and sold 3 million units by the end of its run to pull the company back to profitability after its disastrous flirtation with video games.³⁸ Helping fuel these sales was the first head-to-head advertisement in the electronic game field in which Coleco placed Electronic Quarterback side-by-side with Mattel Football to highlight its more robust list of features.

³⁶ “Toying with Electronics,” Weekly Television Digest with Consumer Electronics, February 26, 1979, 10.

³⁷ “Electronic-Games Race,” The New York Times, December 14, 1980. Note that Bromley is referred to pseudonymously as “Bill,” but in context it is clearly him.

³⁸ Rusel DeMaria, High Score Expanded, (New York: CRC Press, 2018), 37.

While Mattel and Coleco battled it out in the electronic handheld realm, two board game giants introduced slightly larger electronic games designed for play on a tabletop. The first was Parker Brothers, established as the George S. Parker Company in 1885 by its 18-year-old namesake. In 1883, George had grown tired of the moral lessons integral to the board games of the day and started peddling a banking-themed game of his own design intended solely for amusement rather than ethics education. Intending to become a journalist, he instead established his own company to continue marketing games after being forced to quit his job due to a severe bronchial infection.³⁹ For the next 80 years, the firm, which became Parker Brothers after George’s brother Charles joined in 1888,⁴⁰ remained a family owned company best known for its jigsaw puzzles and board games, particularly Clue, Risk, Sorry, and the most successful board game of all time, Monopoly.

In 1952, George Parker died, and his son-in-law Robert Barton took control of Parker Brothers.⁴¹ Barton began a massive expansion of the company into other areas of the toy business that led to rapid growth but also caused a continual cash crunch. By 1966 it became clear that to keep growing Barton would have to secure investment partners, go public, or sell out to another company. A suitor soon emerged in the form of General Mills, a cereal company looking to diversify in the age of conglomerates. Barton resisted at first, but his son Randolph saw a General Mills acquisition as an opportunity to modernize the company through new manufacturing and marketing techniques and pushed for a sale. Barton finally relented – largely due to his desire to retire – and sold Parker Brothers to General Mills in 1968 for $47.5 million. His nephew, Edward Parker, became president, while Randolph – who generally went by Ranny – became executive vice president.⁴²

In 1974, Edward Parker, who was dying of lung cancer, ceded the presidency to Ranny Barton.⁴³ Barton swiftly fired or demoted several top executives and appointed a new set of MBAs to enact the manufacturing and marketing reforms he had long desired. Barton was determined to double his company’s sales within a short period and expressed a willingness to embrace any product that could further this goal.⁴⁴

³⁹ Philip E. Orbanes, The Game Makers: The Story of Parkers Brothers from Tiddlywinks to Trivial Pursuit (Boston, MA: Harvard Business School Press, 2004), 4–7.

⁴⁰ Ibid, 11.

⁴¹ Ibid, 125–126.

⁴² Ibid, 146–152.

⁴³ “Parker Bros. Names Ed Park Chairman, Barton President,” Toy & Hobby World, October 1, 1973, 1.

⁴⁴ Orbanes, 2004, 165–166.

In 1975, a husband and wife team of astrophysicists from Harvard named Robert and Holly Doyle approached the head of R&D at Parker Brothers, Bill Dohrmann, to propose creating an electronic game utilizing a microprocessor that could provide a challenging computer opponent for the player. Dohrmann demurred, both because he believed the company lacked the necessary expertise to enter the field and because he was unimpressed with the prototypes the Doyles had created. After video games took off in 1976, Dohrmann changed his mind and brought the Doyles back in.⁴⁵

The Doyles’ offerings remained unremarkable, but Dohrmann selected a board/electronic game hybrid in which the players take on the role of destroyer captains attempting to locate a submarine maneuvered by the computer for further development. Released in late 1977 under the clunky name Code Name: Sector, the game proved a flop due to an overly challenging computer opponent and an excessive $50 price tag. Despite this setback, Dohrmann realized that with Mattel’s Football handheld proving a hit during the holiday season with simpler mechanics and a cheaper price, Parker Brothers could not ignore the market and would need to try again.⁴⁶

Dohrmann funded a new effort by the Doyles to create a fully electronic game for 1978. The result was a tic-tac-toe playing machine called 3-T. Management felt a pen-and-paper adaptation lacked enough excitement to be a hit electronic product but used it as a base to develop a more elaborate toy. The final product, dubbed Merlin, was shaped like a phone handset and played not just tic-tac-toe, but also four additional games largely created by an industrial designer named Arthur Venditti that involved pressing buttons in response to combinations of light and sound. With its distinctive shape and expansive feature set, Merlin became a smash hit in 1978 and sold 700,000 units.⁴⁷ Despite this success, it was not the most popular electronic toy of the year. That distinction went to a product from Parker Brothers’ oldest competitor in the board game industry, Milton Bradley.

Milton Bradley was established by a draftsman of that name in 1860 to sell lithographs of his own design. Looking for other uses for his lithograph machine, Bradley was inspired by an evening playing an old English board game with best friend and future company president George Tapley to invent a distinctly American board game. Combining the traditional chess board with a narrative based on Puritan tradition, Bradley designed the Checkered Game of Life and nearly single-handedly birthed the board game industry in the United States. By 1920, the company was well established as a maker of games and educational supplies, but soon after it entered into a long decline exacerbated by the Great Depression. Desperate to avoid bankruptcy the board of directors brought in prominent Springfield, Massachusetts, businessman James Shea to turn the company around in 1941.⁴⁸

⁴⁵ Ibid, 171–173.

⁴⁶ Ibid, 173.

⁴⁷ Ibid, 173–174.

⁴⁸ “Milton Bradley Company History,” Funding Universe, accessed June 10, 2019, http://www.fundinguniverse.com/company-histories/milton-bradley-company-history.

After restructuring debt, modernizing facilities, and literally burning mounds of back stock, Shea revived Milton Bradley through government war contracts for a universal joint for landing gear of his own design, wooden gunstocks, and a collection of games for soldiers at the front. Shea also returned the company to a leading position in board games through new products such as Chutes and Ladders (1943), Candy Land (1949), Concentration (1959), and an update to Bradley’s original game called The Game of Life (1960). An even bigger hit arrived in 1966 called Twister, which struck a chord with adults and sold 3 million copies within a year after talk show host Johnny Carson and actress Eva Gabor played it together on an episode of The Tonight Show.⁴⁹

In 1967, Shea ceded control of Milton Bradley to his son, James Shea Jr., who joined the company in 1949 after attending the Wharton School of Business.⁵⁰ In 1977, the younger Shea decided to enter the burgeoning electronic games business but took a conservative approach through adapting the board games Mastermind and Battleship as Comp IV and Electronic Battleship, respectively. When these games proved successful, Milton Bradley looked to expand into more original fare. Its flagship product in 1978 came not from its own designers, but from video game pioneer Ralph Baer.

After his experience developing the Brown Box prototype that became the Magnavox Odyssey, Baer convinced management at Sanders to let him focus on designing entertainment products to license to other companies. His first few attempts ended unsuccessfully. In 1974, he tried to bring Sanders into the coin-op business using circuitry Bill Rusch had created for the Brown Box, but could not be debugged in time to incorporate into the Odyssey. The circuits added velocity sensitivity to the ball physics, which meant that friction could be modeled so that, for example, a spot representing a hockey puck could gradually slow down as it traveled across the ice. Baer incorporated this circuitry into three coin-operated ball-and-paddle games called Skate-N-Score, Hit-N-Run, and Pro Soccer and placed them out on test. Although the games performed well, Sanders decided against entering the coin-op business because it fell so far outside its area of competency.⁵¹ A second attempt to enter the business through video-based horse racing gambling games in partnership with printer company Centronics also failed in 1975.⁵²

⁴⁹ Ibid.

⁵⁰ Jim Kinney, “James J. Shea Jr., Former Milton Bradley Chief, Dies at 87,” Masslive, January 16, 2013, https://www.masslive.com/news/2013/01/james_j_shea_jr_former_milton.html.

⁵¹ Baer, 2005, 93–100.

⁵² Ibid, 121–122.

Baer shifted his focus to the home market by reaching an agreement to become an outside designer for Marvin Glass & Associates. Established in 1941 by its namesake, Marvin Glass had become legendary in the toy industry thanks to a string of hits it sold to major toy firms that included Rock ‘em Sock ‘em Robots, Lite Brite, and the board games Operation and Mouse Trap.⁵³ Marvin Glass passed away in 1974 and was succeeded at the firm by a group of general partners led by Anson Isaacson,⁵⁴ who embarked on a massive expansion of the firm’s efforts both inside and outside the toy industry and put Baer on the payroll to design electronic toys while still maintaining his day job at Sanders.⁵⁵ In July 1976, Isaacson and two others were killed by a disgruntled employee in a tragic murder-suicide, but Baer’s deal continued under Isaacson’s successor, Jeffrey Breslow.⁵⁶

Baer first attempted to bring Marvin Glass into the video game business with a football game in April 1976, but the company was unable to find any takers.⁵⁷ That fall, he took a different tact after he and his principal contact at the company, Howard Morrison, beheld an Atari coin-operated game called Touch Me.⁵⁸ Released in 1974, Touch Me is not a video game, but a pattern memorization game featuring a panel of four buttons that are each a different color. The game plays a series of sounds each accompanied by one of the buttons lighting up. The player must press the buttons in the same sequence to continue, with the sequences becoming longer and more complex as play continues.

⁵³ “Marvin Glass, Toy Designer, Dies at 59,” Playthings, January 21, 1974, 11.

⁵⁴ “Marvin Glass’ Successor to Maintain Company Image,” Playthings, April 1974, 64.

⁵⁵ Baer, 2005, 138.

⁵⁶ “Isaacson of Glass is Dead at 56; Breslow Succeeds in Post,” Playthings, September 1976, 21.

⁵⁷ Baer, 2005, 122–124.

⁵⁸ Baer claims he saw the game at the 1976 AMOA show, but this seems highly unlikely considering the game was two years old at that point. Certainly none of the coin trades at the time mentions Atari featuring the game at the show, though no exhaustive list of games demoed that year exists. It is more likely that Baer saw a unit on location.

Baer and Morrison were not impressed with Touch Me because the form factor was unappealing and the sounds were hideous, but they believed it was built on a solid concept. Baer decided to transform it into an attractive home product and achieved a breakthrough when he decided the sounds should be musical notes instead of beeps. After perusing a children’s encyclopedia, he realized that one of the simplest musical instruments, the bugle, could only play a limited number of notes on a harmonic scale, meaning that the notes could be played in any order without sounding dissonant. Adopting the same principle to the memorization game instantly made the product more appealing than Touch Me.⁵⁹

After sorting out the basic concept in conjunction with Morrison in late 1976 and receiving the go ahead from Jeffrey Breslow, Baer began developing his take on Touch Me in January 1977 under the name Feedback with assistance from Sanders employee Lenny Pope. To power the game, Baer chose the TMS-1000 microprocessor, a 4-bit processor released by TI in 1974 that was fast becoming an industry standard for simple electronic games due to its reasonable price.⁶⁰ In July 1977, Marvin Glass brought the game to Milton Bradley, which requested the company add difficulty levels and some alternate game modes. Once these changes were made, Milton Bradley began focus testing in September and discovered kids were often hesitant to gather around the machine. They determined this was due to a square form factor in which the players were supposed to sit at the corners of the device. The company built a round prototype, and children began flocking to the machine in tests.⁶¹

In November, Milton Bradley greenlit the project under the name Simon and projected an initial run of 300,000 units.⁶² Gameplay remained similar to Touch Me, with up to four players taking turns repeating from memory a series of note patterns generated by the game by pressing the four colored buttons in sequence. At Toy Fair in February 1978, Simon was overshadowed by an electronic spaceship toy Milton Bradley exhibited alongside it called Star-Bird, but once it entered production in March, units began disappearing from store shelves almost as fast as the company could make them.⁶³ By July, Milton Bradley realized it was going to blow through its initial sales target and began adding more shifts and hiring more workers to increase production. By the end of the year, the game had sold 1 million units with no end to its popularity in sight and looked to become the most popular toy the industry had seen in years.⁶⁴

⁵⁹ Paul Drury, “The Making of Simon,” Retro Gamer, no. 73, 2010, 50.

⁶⁰ Ibid.

⁶¹ Terry Atlas, “Simon Says: Ho, Ho, Ho, New Electronic Game is “the Season’s Hit,”’” Elyria Chronicle-Telegram, December 22, 1978.

⁶² Ibid.

⁶³ Sales were likely aided by the November 1977 release of Steven Spielberg’s Close Encounters of the Third Kind, in which scientists communicate with a circular alien spacecraft through a combination of lights and sounds. Baer, 2005, 173.

⁶⁴ Atlas, 1978.

In 1977, sales of electronic games, led by Comp IV and Mattel Football, reached $58 million. In 1978, as Football, Basketball, Electronic Quarterback, Merlin, and Simon all sold in huge quantities the number climbed to $180 million and could have easily been higher if not for a memory chip shortage and an underestimation of demand by the toy industry.⁶⁵ This rapidly growing business threatened to displace a video game industry already beginning to struggle. With electronic handhelds cannibalizing the low end of the market and microcomputers threatening the high end, the programmable console manufacturers were caught in a difficult position as the retail community took a conservative approach to ordering while waiting to see how the public would react to the array of electronic options now available. This situation exerted a profound impact on every company that remained in the console market, including the market leader, Atari.

⁶⁵ Frost & Sullivan, 1983, 27–28.