The cautionary tale of Atari and diminishing returns of digital inertia

By Sarah Lacy , written on January 21, 2013

From The News Desk

All morning I've seen nostalgia pouring through my social networks about Atari filing for bankruptcy. Yes, we all have a fondness for "Pong" ...or those of us in our 30s do. I spent my summers begging my parents for quarters and then racing down the beach in central Florida to play "Centipede" on the boardwalk.

Whenever I see a "Centipede" machine I get really viscerally excited...for about one game. And then I lose interest again, nostalgia or not.

The fact that so many of us still have an emotional reaction to the word "Atari" shows the astounding inertia there is around digital brands. And yet, the company's poor performance amid constantly changing hands since the 1970s shows the limitations of that inertia. We may all think we want to live in a world where Atari is still a thriving company, but not enough to financially support its efforts.

The fact that the original game pioneer is even still around is somewhat stunning. And, it's not giving up. The bankruptcy move is intended to free the US operations from its money losing French parent company. It's still only really Atari in name only. It sold to Warner Brothers in 1976, where its subsequent consoles and home computer attempts failed. Eventually it wound up in the hands of French Infogrames, which changed its entire company name to Atari to cash in on that nostalgia and its back catalog of games.

The US branch is trying to reinvent those titles -- yet again -- for mobile, and is making a profit according to press reports.

This reminds me of an iconic drive-in movie theatre in my home town of Memphis, Tenn. Every twenty years or so, the management team pulls out a for-sale sign on the property and all the hipsters and independent weekly newspapers rally around the drive-in trying to show support so it won't go out of business. The sign goes away; the crowds go back to mega-plexes. And in another 20 years, the chain does it again.

People in the Valley rallied around Palm the same way back when Elevation made a Hail Mary play to save it with fresh top talent and the Palm Pre. It was lauded at CES... and then no one bought it when it came out. Napster is another one whose brand was passed around in hopes of halo effect of its glory days. It never quite worked either.

It's ironic given the popularity of sites like BuzzFeed who do a good job at pulling those emotional heart strings to drive traffic and page views. That seems to be the only growing value of many of these legacy brands in modern electronic currency.

It's a good lesson for people who continually try to resurrect once-popular Web brands, like MySpace or Digg or Yahoo for that matter. Just because people still come to the site out of habit or like the idea of a turn around, doesn't mean they'll actually support it when it counts.