Why Atari secretly created its own competitor: the story of Kee Games

In the early 70s, the video game industry was still in its infancy. Arcades were only beginning to experiment with electronic games, and one company quickly found itself at the center of the new industry: Atari. However, shortly after its first big success, the company faced an unusual challenge. Instead of simply competing with other companies, Atari came up with a strange but clever solution—it secretly created its own rival. The story begins in 1972 when Atari released Pong, a simple arcade game that simulated table tennis. Two paddles bounced a square “ball” back and forth across the screen. By today’s standards it looks extremely basic, but at the time it was revolutionary. Pong machines quickly spread through bars, bowling alleys, and arcades, turning Atari into one of the most important companies in the emerging video game market. Success, however, brought unexpected problems. Atari had not fully protected its design, which meant other companies could easily copy the concept. Within a short time, dozens of manufacturers were producing their own versions of Pong. The market became flooded with nearly identical machines, and Atari suddenly had far more competition than expected.

At the same time, the way arcade machines were distributed created another obstacle. Distributors often signed exclusive agreements with game manufacturers. If a distributor partnered with Atari, they would only sell Atari machines in their territory. While this might seem beneficial at first, it actually limited Atari’s ability to expand. Even if other distributors wanted to sell Atari games, exclusivity contracts prevented them from doing so. Atari co-founder Nolan Bushnell came up with an unusual workaround in 1973. Instead of trying to break the system, he decided to work around it by creating a second company. This company was called Kee Games. On paper, Kee Games appeared to be a completely separate business competing directly with Atari. It had its own president, Joe Keenan, who happened to be Bushnell’s friend and neighbor. In reality, Kee Games was secretly controlled by Atari.

This arrangement allowed Atari to bypass distribution restrictions. Atari could sell its machines through its normal partners, while Kee Games could sell similar machines to other distributors who believed they were working with a different manufacturer. Both companies appeared to be rivals, but behind the scenes they were essentially the same operation. In its early years, Kee Games mostly released slightly modified versions of Atari games. These weren’t exact copies, but they were clearly related. For example, Spike, released in 1974, was based on Atari’s volleyball game Rebound but added a spike button to change the gameplay. Other titles like Formula K and Twin Racer were variations of Atari’s racing games. To arcade operators, it looked like two companies were competing with different ideas, when in reality Atari was simply expanding its reach under another name. For a while, the strategy worked remarkably well. Most people in the industry did not realize the connection between the two companies, and Atari was able to sell its games to more distributors than it otherwise could have.

By 1974, however, Atari was facing financial pressure. The market had become saturated with Pong-style machines, and sales were beginning to slow. Around that time, Kee Games released a new arcade game called Tank. Unlike earlier paddle-based games, Tank allowed two players to control tanks moving through a maze while trying to destroy each other. Mines scattered throughout the arena added an extra level of strategy and unpredictability. Tank became a huge success. Around 15,000 machines were sold, which was an impressive number for an arcade game at the time. The game generated significant revenue and helped stabilize Atari during a difficult period. Ironically, one of the company’s biggest successes came from the very “rival” it had created. Eventually the secret became public: Kee Games and Atari were actually the same company. Surprisingly, the revelation did not cause much backlash. Atari’s games were profitable for distributors and arcade operators, so most people were willing to overlook the unusual business strategy. Soon afterward, Atari officially merged Kee Games into the main company. Joe Keenan, who had managed Kee successfully, was promoted to president of Atari. Kee Games continued to exist as a label for a few more years before eventually disappearing in the late 70s. The story of Kee Games remains one of the most unusual episodes in video game history. Instead of competing with another company, Atari essentially competed with itself. What began as a clever workaround for distribution restrictions ultimately helped the company survive one of its earliest challenges and secure its place in the growing arcade industry.

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