Atari has grown quite a bit profiting off the runaway success of Pong, but by 1974, this growth slows dramatically. First, much of Pong’s popularity has actually been in the form of Pong clones, and with all sorts of arcade game companies jumping on the bandwagon, only a fraction of cabinets playing a form of the game actually come from Atari. On top of that, none of Atari’s other games are doing anywhere near as well- it may seem strange, but Pong had not made the public particularly hungry for more video games. People aren’t really thinking of Pong as a video game at all- Pong is just Pong.

At the same time, tensions within the company are beginning to escalate. The company has a new president in the form of John Wakefield, a corporate psychologist…who also happens to be Nolan Bushnell’s brother-in-law. This pisses off Ted Dabney quite a bit, who finds Wakefield and many of the other new hires completely incompetent. Dabney sits down with Bushnell at a pizza parlor, and the two have a serious talk. Dabney thinks the company is going down the wrong path, and wants the new leadership gone. Bushnell resists- he sees the new hires as his friends, and doesn’t want to have to fire them. The disillusioned Dabney becomes much less involved with the company, although he’s still on the board of directors.

These are the least of Atari’s troubles, however. With the global spread of Pong, it was only a matter of time until Ralph Baer got wind of it, and when he does, he is not happy. Despite the slight differences between the two games, it’s not hard for Baer to tell it comes from the Table Tennis game he’d designed. Magnavox still has the patents for Baer’s Brown Box design, tracing back almost a decade prior by now, so Magnavox begins gearing up for legal action.

January

  Created by Dave Kaufman, Star Trader is published for mainframe computers as BASIC source code in the People's Computer Company newsletter. Through the text interface, players trade goods and resources in space to accumulate as much money as possible.

Star Trader’s text interface, including its map system made of text symbols.

February

  Atari's 40th employee is hired, a computer technician from the area named Steve Jobs. Al Alcorn is impressed enough to hire him based on the circuit board Jobs brings down to the office, a version of Pong’s board which Jobs says he had built himself. What Alcorn doesn’t know is that the board was actually built by Jobs’s friend, Steve Wozniak.

  A version of Maze War is created in MIT's computer lab. Originally created by Steve Colley, Greg Thompson, and Howard Palmer the year prior, the multiplayer game lets players move around a grid, shooting each other from a pseudo-3D perspective. Over at MIT, Greg Thompson and Dave Lebling port to the game to the university’s PDP-10, adding a plethora of features- a scoring system, a level editor, and support for up to eight players over the ARPANET. It is the first game with a 3D first-person perspective, the earliest first-person shooter game, and the first of either to playable multiplayer over a network.

An early version of Maze War, running on its original hardware.

March

  Very close to when this version of Maze War is completed, Spasim is created by Jim Bowery. The second game to use a 3D perspective, teams of players in spaceships fly around shooting each other. Built on the PLATO system, it also supports network multiplayer, but this time with up to 32 players, making it the earliest first-person shooter with team-based multiplayer. The game becomes popular on PLATO system, where it inspires Silas Warner, a programmer in the community who had previously been involved with Empire, to create the game Airace, a similar game using some of Spasim’s code.

Spasim’s creator, Jim Bowery, playing an emulated version of the game. Note that Bowery erroneously calls it a virtual reality game, which doesn't correlate to the actual game,

  After Airace, Brand Fortner and Kevin Gorey create Airfight based on the game. Becoming one of the most popular PLATO games, Airfight leans much more into the flight simulation aspect, laying down the foundation for future flight simulators decades later.

Brand Fortner speaks about Airfight.

A slow-paced game of Airfight.

  Meanwhile, as Ted Dabney becomes increasingly disillusioned with Atari, Nolan Bushnell pressures him into leaving the company. It’s not that he doesn’t want Dabney around- it’s that he wants Dabney to sell his 40% stake of ownership in the company. First, Bushnell threatens Dabney with the prospect of transferring all of Atari’s assets to another corporation, leaving him with nothing, unless he sells out all his shares. Then, Bushnell gets Dabney to spill the beans about Kee Games to people who weren’t supposed to know about it, which gets Dabney kicked off the board of directors. A fed-up Ted Dabney leaves the company entirely, feeling that preserving his friendship with Bushnell is more important than fighting for the company.

Ted Dabney discusses why he left Atari.

April

  In Japan, Tomohiro Nishikado is coming up with more sports video games, this time a basketball game. It is the first arcade video game to be based on the sport, and also Nishikado's first to include full sprite graphics. Taito goes to Midway Manufacturing to distribute the game overseas, making it the first Japanese video game to be released outside Japan.

TV Basketball played on an emulator, with first-ever full sprite graphics.

  Magnavox cracks the whip on Atari, filing suit for patent infringement against them and several distributors in US district court for the Northern District of Illinois, Eastern Division. They’re going after Pong, but not for infringing on Magnavox Odyssey Table Tennis- they’re suing Atari for infringing on their patent for video games in general. In retrospect, owning the concept of a video game seems equally as ridiculous as owning books or owning movies, but in a time when the number of total video games in existence had barely progressed past double digits, Magnavox genuinely believes that Ralph Baer’s patents hold a genuine claim to video games as a medium. If they win the case, Magnavox will own all video games. Anyone who wants to make one will have to go through them, by making a deal to license Baer’s patents.

A large portion of the case is dedicated to agonizing over what constitutes a video game, not only to determine whether an arcade video game falls under the definition, but also to determine whether the Brown Box was actually the first- if someone had made a video game before Baer, then it would put his status as the inventor into question. Thomas Goldsmith Jr, the inventor of the Cathode-Ray Tube Amusement Device, is called in as a witness. So is William Higinbotham, the creator of Tennis For Two, which is of particular interest since it’s a tennis game, very similar to Table Tennis and Pong.

Nolan Bushnell discusses the nature of ideas.

June

  Atari had been struggling even before the lawsuit, but now it reaches a point where they need to downsize. They announce a “significant reduction in personnel,” firing John Wakefield, and several other members of the leadership shortly after. Replacing Wakefield as president is: Nolan Bushnell, who is also the chairman of the company, giving him almost complete control over the company.

July

  While Atari is doing badly in the US, this is nothing compared to how bad Atari Japan has it. Employee theft is cited as a factor, but the company is also struggling for many of the same reasons Atari in the US is, piled on top of the fact that Atari simply didn’t know how to break into the Japanese market. Once it gets to the point that the branch president simply stops showing up to work, Atari decides to sell the branch. Their first picks for buyers are Taito and Sega, but neither are interested in salvaging the dumpster fire it had become, and they land on Nakamura Manufacturing instead. As part of the agreement, Nakamura Manufacturing becomes the sole distributor of Atari's games in Japan for the next ten years, and becomes responsible for all the operations that Atari Japan had handled.

September

  Atari can no longer support the ruse of Kee Games, and, faced with financial struggles in both companies, it reabsorbs the company as a subsidiary. In its new life as a subsidiary, it is tasked with creating new arcade video games for Atari, basically functioning much how a second-party development studio would.

October

  Atari releases the arcade game Touch Me. Unlike the rest of Atari’s offerings, it’s not actually a video game- completely lacking a video screen, it instead has a row of four lit-up buttons. The lights flash in a random order, with the player needing to memorize the order and re-input it, vaguely similar to the playground game Simon Says.

A Touch Me cabinet, with the exceedingly uncomfortable title “touch-me” visible above the row of lights.

  The same month, they release Gotcha, in both a monochrome version and a second, limited-release color version. Designed by Al Alcorn, its gameplay isn’t much to write home about , but its limited release is the first known video game to use color.

The inscrutable gameplay of Gotcha, in all its full-color glory.

November

  Taito releases Speed Race in Japanese arcades, by Tomohiro Nishikado. It is Nishikado’s first game to use scrolling graphics, an innovation which greatly widens the possibilities of video game design. As the first racing video game in Japan, it becomes popular enough to make its way to the US, where it is known by the names Racer and Wheels.

The Western release of Speed Race, played with its steering wheel control scheme.

  In the US, Atari releases Tank, the first game to come from its new subsidiary Kee Games. Steve Bristow, the creator of the game along with Lyle Rains, had been with the company stretching all the way back to their days at Ampex, and had helped with the production of Computer Space shortly before its release. He’d found the controls of Computer Space too difficult to control, though, and liked the idea of changing them to simple tanks, switching the game back to a multiplayer format. Ironically, the “Tank controls” he comes up with, intended as a simpler and easier-to-understand control scheme, are eventually known for being slow and hard to use.

A slightly later version of Tank. For directions or more info, please check the original source here. The unintuitive default controls use E/D for the left track, U/J for the right track, and the left CTRL key to shoot.

December

  Sega holds the “TV Game-ki Zenkoku Contest”, a nationwide competition of their Table Hockey game, a Pong clone with a shorter, horizontal screen. It is the first large-scale video game competition. Sega’s growing notoriety during the competition drives them to increasingly pivot from electro-mechanical arcade games and towards video games.

Competitors playing Table Hockey, with Sega’s logo at the time visible on the back wall.

The medal for the winner of the competition, ultimately awarded to Osamu Kuroda.