E.T. does not bear sole responsibility for the crash

While the popularity of home computers was growing, a flood of VCS games entered the marketplace in 1982 and posed a problem for the industry. Orders from retailers were overambitious, and cartridges ended up returned or deeply discounted in the bargain bin. Feeling burned, many retailers chose not to place new orders. There were so many titles that consumers had a hard time discerning which ones were likely to be enjoyable and which were likely to turn into clearance cartridges that were a fifth the price of newly released titles—perhaps worth even less than this. The first wave of returns and the ensuing sales slump forced most of the third-party developers out of business. E.T. almost certainly does not bear sole responsibility for the crash, but, like a finger pointing to the moon, it shows that the industry was putting effort into licensing rather than design and programming, inundating the market with less innovative work that had been forced through the development process quickly. This crash was not the end of the Atari VCS—or, as it had come to be known by this time, the Atari 2600. But it was the end of one incarnation of Atari, a company that had already been transformed under Warner, and it was the end of the boom years for the first popular cartridge-based system. Many thought that it was end of video games, which they imagined were a passing fad.

Racing the Beam: The Atari Video Computer System, Nick Montfort and Ian Bogost