Atari Games

History

When the Atari, Inc. division of Warner Communications lost $500 million in the first three quarters of 1983, its arcade coin-op division was the only one to make money. In 1984, Warner sold Atari's consumer products division to Jack Tramiel; he named this company Atari Corporation. Warner retained the coin-op division and a few other assets and changed the name of Atari, Inc. to Atari Games, Inc. The agreement between Tramiel and Warner Communications was that Atari Games must always include the "Games" after "Atari" on its logo and that Atari Games could not use the Atari brand at all in the consumer market (computers and home consoles). Atari Games retained most of the same employees and managers that had worked at the old Atari Inc. It was able to carry on with many of its projects from before the transition. Atari Corp., in contrast, froze projects and streamlined staff and operations. In 1985, Warner Communications and Namco jointly formed a new corporation, AT Games, Inc., and Warner transferred the coin-operated games division of Atari Games to the new corporate entity. Namco owned the controlling interest in the new company, while Warner retained 40%. Warner subsequently renamed Atari Games, Inc. to Atari Holdings, Inc., and AT Games became Atari Games Corporation. Namco later lost interest in operating Atari Games and sold 33% of its shares to a group of employees led by Hideyuki Nakajima, who had been the president of Atari Games since 1985. As the company was now split between three entities, Warner (40%), Namco (40%), and the employees (20%), and none of them held a controlling share, Atari Games effectively became an independent company. Atari Ireland was a subsidiary of Atari Games that manufactured its games for the European market; while under Namco, Atari Ireland also manufactured Sega's Hang-On (1985) for the European market.

Atari Games continued to manufacture arcade games and units, and starting in 1988, also sold cartridges for the Nintendo Entertainment System under the Tengen brand name. The Tengen name was used for its home consumer division that released games, while its home games were mainly developed by Atari Games staff. The companies exchanged a number of lawsuits in the late 1980s related to disputes over the rights to Tetris, of which Tengen had published a version for the NES, and Tengen's circumvention of Nintendo's lockout chip, which prevented third parties from creating unauthorized games. (Atari Games' legal battles with Nintendo were separate from those of Atari Corporation, which also exchanged lawsuits with Nintendo in the late 1980s and early 1990s.) The suit finally reached a settlement in 1994, with Atari Games paying Nintendo cash damages and use of several patent licenses.

In 1989, Warner Communications merged with Time Inc., forming Time Warner. In 1994, Time Warner reacquired a controlling interest in Atari Games and made it a subsidiary of its Time Warner Interactive division. While the company initially maintained the Atari Games brand for arcade games under the new ownership, the Tengen brand was dropped in favor of the Time Warner Interactive label for its home console games. In mid-1994, the Atari Games, Tengen, and Time Warner Interactive Group names were all consolidated under the Time Warner Interactive banner.

On July 12, 1994, Nakajima died at the age of 64. Ed Logg, who was a chief programmer of Atari, briefly left the company for Electronic Arts, only to rejoin Atari Games in 1995 to run its home console games. Time Warner Interactive, via Atari Games became a member of the Nintendo Ultra 64's Dream Team in the mid-1990s.

In April 1996, after an unsuccessful bid by Atari co-founder Nolan Bushnell, the company was sold to WMS Industries, owners of the Williams, Bally and Midway arcade brands, which restored the use of the Atari Games name, while the home consumer division was folded into Williams Entertainment, with its existing home consumer division was kept. According to Atari Games president Dan Van Elderen, in 1995, Time Warner decided to exit the video game business and instructed the management at Atari Games to find a buyer for themselves, which surprised him because usually parent companies choose the buyers for their subsidiaries. Time Warner would not return to the video game business until the formation of Warner Bros. Interactive Entertainment on January 14, 2004.