A (Very) Brief History of Coleco

Coleco Industries, which was originally named the Connecticut Leather Company, was founded in West Hartford, Connecticut in 1932 as a shoe leather company by Russian immigrant Maurice Greenberg. Moving into plastic molding in the 1950’s, Coleco eventually sold off their leather business, and became a publicly traded company. By the beginning of the 1960s, the company is one of the largest manufacturer of above-ground swimming pools. In 1976, after an unsuccessful attempt to enter the dirt-bike and snowmobile market, they release Telstar, a clone of the home PONG unit being sold and marketed by Atari.

Despite the fact that Coleco is certainly not the only company releasing home PONG clones, they enjoy moderate success and go on to produce nine more varieties of the Telstar unit. Unfortunately, in 1978, as the home videogame market moves to programmable, cartridge based game units, Coleco is forced to dump over a million obsolete Telstar machines at a nearly crippling cost of more than 20 million dollars.

Coleco president Arnold Greenberg ignores this near disaster and directs his R&D team to begin work on a new home videogame system, the ColecoVision, which he feels will set the standard in graphics quality and expandability.

Released in the summer of 1982 at a retail cost of $199, the ColecoVision has the ability to display 32 sprites on-screen at the same time, along with a 16 color on-screen palette out of a total of 32. In addition, the ColecoVision features three channel sound. The key to this new system’s success, however, as with many of the new home systems being released at this time, is the included cartridge. In the case of the ColecoVision, Coleco successfully negotiated the right to release the smash arcade hit Donkey Kong.

While amazingly popular, Coleco’s release of Donkey Kong with the ColecoVision was not without its problems. Universal City Studios Inc, believing that Donkey Kong infringed upon thier own King Kong, threatened both Nintendo and Coleco with legal action. With a large sum of money already invested in the license, Arnold Greenberg agreed to pay Universal 3% of the net sale price of the game. Unlike Coleco, Nintendo fights the lawsuit, offering numerous in-court demonstrations or gameplay vs. movie plot. In addition, Nintendo argued that in a previous case, Universal had themselves argued that King Kong’s characters and plot were in the public domain. The result was that Nintendo is successful in their claim, and was awarded $1.8 million in damages. Nintendo’s victory immediately prompted Coleco to file suit against Universal, the result of which was the receipt of a portion of the royalties they had previously paid to Universal.

Beyond Donkey King, twelve additional cartridges were released along with the ColecoVision. While Atari had pioneered the licensing of arcade games for home play with Space Invaders, Coleco makes this a key part of their strategy, aggressively seeking licenses for coin-operated games instead of concentrating on developing original games. The first wave of these games includes translations of such arcade games as Lady Bug, Space Panic, Mouse Trap, Venture, Space Fury, and Zaxxon. While the conversations were hardly flawless, the ColecoVision’s relatively advanced graphics are able to capture the look and feel of the coin operated originals upon which the cartridge versions are based.

Hitting the market in the midst of the public relations war between Atari and Mattel, the ColecoVision sells for around $100 more than the Atari 2600 but also $35 less than Mattel’s Intellivision. The price point combined with Donkey Kong makes the ColecoVision an instant success. The first run of 550,000 unites sells out almost immediately. By Christmas of 1982, one million of the systems, along with more than 8 million cartridges, have been sold.

After the initial release of the ColecoVision in 1982, Coleco immediately releases the Atari 2600 Converter. Selling for $60, the Atari 2600 Converter allows users to play Atari 2600 cartridges on their ColecoVision. The Atari Converter is amazingly popular, and goes on to sell 150,000 units within the first three months after its release. However, as one would expect, its release results in a flurry of litigation, starting with a $350 million lawsuit from Atari over patent infringement. Coleco counter-sues for $550 million, claiming that Atari is infringing on U.S. anti-trust laws. The two companies eventually reach a settlement, resulting in Coleco paying royalties to Atari on every Atari Converter unit sold.

By the end of 1983, the ColecoVision has sold more than 1.5 million units, surpassing the number of units sold by the Atari 2600, the Mattel Intellivision, and Atari’s new 5200 Supersystem. In addition to the Atari Converter, the 29 game publishers who are producing cartridges for the system give the ColeoVision the largest game library of any console currently on the market

After the success of the ColecoVision, Coleco decides to invest not in the production of a new home game system, but in a home computer system instead. This was a logical step for Coleco as they, along with the other major home videogame system developers, are beginning to suffer financially as consumers turn to home computer systems such as the Commodore VIC-20 or the The Commodore 64.

Coleco’s answer was the ADAM computer. The ADAM computer is released as two separate versions. One version of the ADAM is a stand-alone unit, while the other version, called Expansion Pack #3, involves a series of add-ons the existing ColecoVision game system.

The hardware for both units includes 64K of RAM and 32K of ROM (expandable to 144K). Interestingly enough, the hardware also includes a built-in word processor. The stand-alone system featured two game controllers, and an external cartridge slot into which ColecoVision cartridges can be inserted and played. Both systems include a full-size keyboard, a digital tape drive, and a large printer that also serves as the unit’s power supply.

By late 1983, Coleco has received a delayed approval from the FCC on the ADAM design, and the company frantically begins mass production to meet the 400,000 pre-orders that retailers are demanding before the pivotal Christmas season. With a retail price of $600 for the stand-alone unit, and $400 for the ColecoVision add-on package.

Unfortunately, public reaction to the ADAM is mass indifference. Sales are vastly below what Coleco had originally predicted. Out of the pre-orders, only 100,000 eventually sell. The primary problem for the ADAM’s low sales was that it was remarkably buggy. One of the most dramatic problems was that the machine emitted a magnetic pulse when it powered up, erasing any tapes accidentally left in the drive. Matters were made worse by the fact that many of the ADAM manuals instructed user’s to put the tape in the drive before actually turning the computer on.

Eventually, 60% of all ADAMs are returned to stores as defective. In 1984, with the rest of the home videogame market in a downward spiral, the consumer electronics division of Coleco loses over $258 million dollars.

In an effort to bolster sagging sales the retail prince of the standalone ADAM unit is reduced to $300. However, not even this price reduction in addition to a billion dollars in Cabbage Patch Kid sales can save the company from the losses it incurred as a result of the abject failure of the ADAM. By 1985, the ADAM and ColecoVision line of electronic devices are abandoned by Coleco. Shortly thereafter, Coleco itself files for Chapter 11 bankrupcy in 1988.