In the golden age of the video arcade, during he late seventies and early eighties, games like Pac Man, Asteroids, Centipede and Defender were gold mines. A single $3000 arcade machine could collect more than $1000 a weekend in quarters. This new gold rush attracted quite a few prospectors. Many of these “wanna-be” arcade game creators lost their shirt in the rush to release games. A manufacturing run of 1000 arcade machines requires a considerable investment; a poor game burned into these machines would return little on that investment.
Faced with millions of dollars of potential investment, arcade game developers sought to insure that the best possible game software was developed. Games themselves cost less than a single arcade box, so it was highly cost effective to throw bad games out and try again and again before committing to manufacturing hardware. As a result, game software development was highly iterative. Executives would fund a game idea for a month of development. At the end of the month they would play the game and decide whether to fund another month or move to field testing.
Companies like Atari would field test a game idea by placing a mocked up production machine in an arcade along-side other games. Several days later they would count the quarters that the machine collected and — based on the money collected — decide whether to mass produce the game, tweak it or cancel it outright. Some early prototypes were so successful that their coin collection boxes overflowed and led to a failure of the hardware!
This iterative approach help fuel the release of consistently high quality games from companies like Atari. The decline of Atari and the market in general in the mid eighties was caused by the larger proportion of inferior games released due to dropping hardware costs (through the introduction of cartridge based consoles). The financial “kill gate” of distribution cost disappeared and so did much of the disciplined iteration that insured better games.