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A bit of spooky history today, with the help of the ever so kind Wikipedia article on the subject. First it’s causes:

 
  • The second generation of consoles was the first to be sustained by large libraries of interchangeable software. Interest in consoles has historically sagged after 5 years, and in 1983, Atari’s market leader, the 2600, was celebrating its fifth birthday. Without established precedent, the industry was not prepared to take consoles to the next generation, and the long-term delay of Atari’s own 7800 consoles left it with little to captivate consumers hunger for the next big thing.
  • A flood of consoles on the US market, giving consumers too many choices. At the time of the US crash, there was a plethora of consoles on the market: Atari 2600, Atari 5200, Bally Astrocade, ColecoVision, Coleco Gemini, Emerson Arcadia 2001, Fairchild Channel F System II, Magnavox Odyssey2, Mattel Intellivision (and its just-released update with several peripherals, Intellivision II), Sears Tele-Games systems (which included 2600 and Intellivision clones), Tandyvision, VTech CreatiVision, and Vectrex. Each one of these consoles had its own library of games, and many had (in some cases large) third-party libraries. Likewise, many of these same companies announced yet another generation of consoles for 1984, such as the Odyssey3, and Atari 7800.[1]
  • A flood of poor titles from hastily financed startups, combined with weak high-profile Atari 2600 games such as the game based on the hit movie ET and an infamous port of the popular arcade game Pac-Man. These games were also notoriously overproduced.
  • The news media sensationalized both the boom days of 1980 and the problems of 1982–83. In particular, the story of Atari burying millions of ET cartridges in a New Mexico landfill[2] shifted the outlook of the video game market in the eyes of many media outlets.

Seems to me I see some similarities to today. Here’s to hoping it doesn’t happen again, especially these days when with the explosion of casual games and big profits from small games, so many publishers are turning towards low budget simple games…