Fallout of the 1983 crash
Bad economic news is often prefaced with the phrase "worst [insert economic indicator] since 1983". The game market crash of 1983 is often attributed to an over-saturation of crappy games and that was certainly a major factor. The economy of the time must be included as a catalyst too. I think the industry would have survived the flood of awful games had it not coincided with the bottom of a recession.
Although 1983 was a horrible year, the real fallout of the crash wasn't felt until the next two years. It was the 12-month span from mid-1984 to mid-1985 when the land of video game consoles was a barren desert.
Over this time period only three systems were still being supported with new games. Saying that is something of a stretch though. The Intellivision didn't have a single game released in 1984 but resumed production in 1985 [source]. Realistically, only the two Atari systems had new games being created. How pathetic was that? Something great was right around the corner, but it was a very dark year for video game fans until it arrived.
2009 was a similar economic climate to 1983 yet gaming thrived. I'm sure someone with a minimal background in economics can rattle off a few hard statistics that explain the differences but with my limited knowledge I'm forced to take a simplistic approach. The way I see it, when the economy is bad people eliminate spending on non-essential items. Adjusting for inflation, video games were far more expensive in 1983 than 2009. Video games are a relatively cheap hobby with game prices typically falling 50% a year after release. If anything, video games have become a way to escape a rocky time period, a way to help wait it all out for a few months.
1983 vs 1996 - Which was the bigger bloodbath?
Although 1983 was a low-point for gaming, it wasn't the year that witnessed the most console deaths. 1983 saw four consoles vanishing and a fifth that was on its last legs. Thirteen years later though, a total of six systems were wiped-out including one that launched that very same year. The Sega CD was canned in late 1995 and the Game Gear was effectively done in 1996 with one outlier release in the summer of 1997 stretching out its lifespan.
Of course comparing 1983 and 1996 is something of a tongue-in-cheek exercise. The reasons for the disappearance of game consoles couldn't have been more different. While 1983 was the end of an economic downfall, 1996 was the start of a major upswing during an economic boom. Technology was hot and consumers just had to get the latest gizmos. This was a boon for the PlayStation and Nintendo 64 that left all the previous-gen systems in the dust. All the systems that called it quits in 1996 started really declining in 1995 when the Saturn and PlayStation first launched. A year later even their most delusional die-hard fans finally gave up on them (I'm looking at you Jaguar fans and that one dude who thought the 3DO M2 would rule the gaming world).