Crash And Burn: The Amiga ST Story

Tales From The Dork Web #14

On July 23rd 1985, a little over a week and 35 years ago a star-spangled launch took place at the Lincoln Center, New York. Featuring pop star Debbie Harry, a live orchestra, and legendary Artist Andy Warhol. This was no art show, this was different. The star-studded launch was for a new computer that would change things forever.

This issue’s story isn’t about technology. It’s about the people behind it. It’s a story of avarice, hatred and an unbridled lust for revenge that descended into a war of attrition.

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This issue’s music comes from The Ink Spots. If you’ve played Fallout it might be familiar. I thought it fits Jack Tramiel’s story well. Hit play and read on.

Driven To Destruction

Jack Tramiel was born in Lodz, Poland. He survived Nazi's Auschwhitz death camp, emigrated to the United States and served in the US Army where he learned how to repair typewriters. Studying Tramiel's life, if one word described him it'd be, “driven”. If two words were available, the second one would be too obscene to use here.

After leaving the army and a spell as a taxi driver, Tramiel worked at a typewriter repair shop. After bringing a huge deal to his employer and getting nothing in return he quit. Tramiel and an army friend bought a repair shop with a military-backed loan. They settled on the name Commodore Portable Typewriter because General and Admiral were already taken.

In the 1950s he imported typewriter parts from Warsaw Pact countries to Canada. He could then produce “Canadian made” typewriters for export to the US. After taking Commodore public, facing Japanese competition and some dodgy loan company dealings Tramiel sold 17% of his stock to Canadian businessman Irving Gould (below) for $400,000.

Gould suggested Tramiel visit Japan to find out what was coming out next. He came back convinced that calculators were the future. Commodore’s LED digital calculators were a huge hit. Chip supplier TI jacked up their prices while releasing their own caculators to undercut Tramiel and force Commodore out of the market.

Low on cash from TI’s shenanigans Tramiel convinced Gould to inject more money into Commodore in exchange for more shares. He used the cash to buy struggling chip manufacturer MOS Technology. Now Commodore could beat TI at their own game.

MOS’ lead designer Chuck Peddle told Tramiel that calculators, like typewriters were a dead end business. To Peddle the future was in desk-sized computers. Tramiel gave Peddle 6 months to prove it by building and shipping a personal computer.

The PET (left), with Tandy’s TRS-80 (right) and the Apple II formed the 1977 trifecta kickstarting America’s Personal Computer revolution. (Image above courtesy of Boston-based collector Timothy Colegrove via wikipedia)

Commodore’s phones rang off the hook. They had 50 calls a day from people wanting to sell the PET. Distribution couldn’t keep up with demand. The PET’s success was partly due to it's built-in BASIC interpreter. Commodore outsourced BASIC to a small firm called Micro-Soft. Micro-Soft agreed to be paid $25,000 in total for the Commodore’s PET BASIC regardless of how many items and different models sold.

Atari used MOS’ 6507 chip to build their Atari Video Computer System, also released in 1977. The VCS lacked a keyboard and BASIC language. Instead it had colour and sound. Home versions of popular arcade games Tank, Pong and Breakout took off.

The Atari VCS was an enormous hit and Atari was sold to Warner Telecommunications. Initially this was seen as a shrewd move for Warner but after several unsuccessful products Atari became a bottomless money pit. After gouging staff out of bonus payments several Atari developers quit to set up Activision. Armed with intimate knowledge of the VCS, they churned out hit game after hit game.

Atari hardware enginer Jay Miner (above) worked on graphics chips for the VCS and 8-bit computer range. Frustrated by their limits Miner asked Atari for permission to work on a new 16-bit system with custom chips. Atari refused and he quit.

Activision were on fire. Investors wanted an Activision games machine. CEO Larry Kaplan brought Miner in to work on the new computer through a spin-off venture, Hi-Toro. In 1982, Hi-Toro changed their name to Amiga Corporation to avoid confusion with the Japanese Hi-Toro Lawnmower company.

The VCS was rebranded as the 2600 in 1982. Amiga released the Powerstick and Joyboard add-ons in the same year. These peripherals weren't major money spinners but they just about kept the lights on.

The Bubble Bursts

In 1983 the US games console market imploded taking Coleco, Fairchild, Magnavox and countless others out of the market. Atari scraped by thanks to Warner Communications bailouts. Activision barely made it out alive and pulled out of Amiga.

Ahoy’s video above brilliantly covers the crash. In Europe, the ZX Spectrum and Commodore 64 home computers were taking off. In Japan Nintendo launched the Family Computer System (NES in the US).

While Commodore's C64 hit it big in Europe, Texas Instruments’ TI-99/4a humiliated Commodore at the market’s low end. Compared to Texas Instruments’ TI-99/4a, Commodore’s low-end VIC-20 computer’s 1982 sales were atrocious. Tramiel declared a price war. Over 1983, he dropped VIC-20 wholesale prices from $199 to $100. When TI cut prices, Tramiel cut the VIC-20 again. TI Offered a $100 rebate on the TI-99/4a, so Tramiel offered a $100 rebate on the C64. In the end TI sold their 4a below cost at $99, a move that hurt so badly that they left the home computer market. Spectravideo’s Harry Fox said at the time, “TI got suckered by Jack”.

By late 1983 Tramiel had crushed his enemies, seen them driven before him and heard the lamentations of their dealerships. He controlled the low end of the market with the VIC-20 and the high end with the C64. Retailers hated him but couldn’t afford not to stock his products. Atari had imploded and was burning a million dollars a week. TI were utterly humiliated.

One spring day in 1984 Jack Tramiel left Commodore.

Gould had backed Tramiel since the 60s. There were several possible causes but the only two people who know what happened are dead. Tramiel walked out and never looked back. He set up a company, Tramel Technology Limited and took his wife on a round the world cruise while figuring out what to do next.

Gould replaced Tramiel with Marshall F. Smith. Marshall had no retail, consumer or electronics experience but did as he was told. Commodore planned a PC clone to compete with IBM, even licensing rights to produce Commodore-branded Intel compatible CPUs. All they needed for the clone was Microsoft’s MS-DOS. When they tried to strike a deal, Bill Gates personally dismissed it in a fit of rage, saying of the Tramiels,

“I will never deal with them. We’re not even going to talk about MS-DOS until you dismiss the lawsuit and then we’ll talk about terms for that.”

“The lawsuit” was a Jack Tramiel special. A year earlier, Commodore announced they'd sell Microsoft’s Multiplan spreadsheet at a lower price than any other platform. In violation of Antitrust rules, Bill Gates told Tramiel they (Commodore) couldn’t do it. In response Tramiel launched a $24 million anti-trust lawsuit against Microsoft. Commodore dropped the lawsuit and eventually secured MS-DOS licences, but the damage was permanent.

Amiga’s hardware reached the breadboard stage but developers took out second mortgages in-lieu of salaries. Amiga introduced Lorraine at the January 1984 Winter CES show. The prototype was hidden behind a panel away from sight. People were blown away by the Lorraine’s demos, including Atari staff.

Atari needed something, anything to replace it’s 8-bit line. Discussions with Amiga started in 1983. The deal was simple: Atari would build their “Mickey” console using Amiga’s chips. They’d manufacture the chips and pay Amiga Corporation for each console or arcade machine built. Atari offered a desperately needed $500,000 advance. As discussions progressed Atari pushed for the right to turn Mickey into a computer. Amiga needed the money and took it. Atari could be tomorrow’s problem.

Tramiel’s round-world trip was cut short by a call from Warner CEO Steve Ross asking if he wanted to take over Atari. Tramiel headed to California, and set up an office nearby to discuss an acquisition. While in California a Commodore exec told Tramiel about a C64 killer he saw at CES. Amiga CEO Dave Morse met Tramiel and his sons several times. Tramiel’s sons were all still employed as Commodore VPs while they sat in discussions set up to help their Dad evaluate the C64 killer.

Amiga CEO Dave Morse put forward an initial $3 per share offer. Every time he tried to negotiate the Tramiels’ counter-offer dropped. Eventually the Tramiels’ offer dropped below $1 and talks disintegrated. The Amiga team wanted nothing to do with the Tramiels. They’d stick with Atari, and everything would work out fine.

Unaware of Amiga-Atari discussions, Tramiel poached Commodore’s best technical staff including Shiraz Shivji (above). Shivji was one of the C64 designers and the lead hardware designer on Commodore’s new Unix workstation. Shivji's team started work on the project, RBP (short for Rock Bottom Price) based on Motorola’s 68000 CPU.

Over the first half of 1984, Tramiel sweet-talked Warner into handing over the company, it’s assets and none of it’s liabilities in exchange for little more than shares in the new firm. Warner would be free of Atari and would profit from any turnaround. Tramiel, his sons and staff would move to the new Atari company for no money down.

When Amiga Corporation heard that Tramiel was going to take over Atari, they needed to get out. If the Tramiels abused the $500,000 Atari loan agreement Amiga could lose the chips entirely. They needed to find $500,000, and quick.

At June’s 1984 Summer CES show the Lorraine prototype was now silicon. Commodore released an already obsolete portable C64 alongside two less powerful C64-incompatible machines. Meanwhile the Tramiels held meetings with Warner.

Amiga’s RJ Mical and Dale Luck had worked on a demo featuring a bouncing ball for the January Winter CES show. On the first night they refined it over a 6 pack of warm beer. Dale talks about it above, and you can see it on an actual Amiga 1000 below.

The bouncing ball shocked viewers. When the screen showed it running alongside other demos the crowd started to look for signs of cheating. The Amiga Lorraine built a huge buzz at CES but CEO Dave Morse still needed a buyer. He hawked the Amiga around Silicon Graphics, Sony, Hewlett Packard and even Apple hearing the same concerns. Nobody wanted anything that wasn’t IBM compatible.

Commodore knew Tramiel’s poached team were working on something big, so they looked at the Amiga. If they bought the product they’d get the Jump on Atari. The only thing that could go wrong was if Tramiel stopped them using the chips in a new computer. But as Tramiel was tied up with Atari that could never happen.

Tramiel didn’t need to buy Amiga Corporation. He already had the chip rights. Shiraz’s RBP didn’t even use them. Commodore’s Unix system was still two years away. The RBP could take the new 16-bit market and leave Commodore in the dust. The only thing that could go wrong was if someone built a rival computer with the Lorraine chips at a similar price point. As Tramiel had the rights that could never happen.

The Amiga and Commodore teams bonded over their shared love of not being owned by Jack Tramiel. Dave Morse put his cards on the table: Amiga needed a loan of over $500,000 to pay Atari within 3 days to ensure that the chips didn’t automatically go to Tramiel. Commodore needed a new low-cost computer to replace the C64 and Lorraine could be it. Commodore approved a loan and focused on licensing the chips.

Two days later Amiga’s Dave Morse went to Atari’s offices with a $500,000 cheque. Atari couldn’t understand why Amiga didn’t want to let them use the chips in the Mickey console. At the same time Tramiel was in a meeting with Atari wrapping up negotiations. When asked what to do about the cheque he said,

“When somebody hands you a check for $500,000 you take it. You get it into the bank quickly.”

Had he known the full picture Tramiel might not have taken the cheque, but $500,000 was a lot of money to bring into Atari. Over the next few days Tramiel took over Atari in exchange for stock in Tramiel’s new Atari Corporation company.

Commodore started 1984 as a billion dollar stock market darling but by now was crashing hard. The markets knew Tramiel was on the move, that Commodore only had the C64 and that there was nothing new. Gould expected a stock price hit, but nothing like this. Fed up with staff being poached, Commodore executed the Tramiel playbook.

Commodore filed a lawsuit against four former staff including Shiraz Shivji for stealing intellectual property. An injunction was filed to stop the “Commodore 4” from working at Atari, slowing down RBP development. They stopped whatever Tramiel was up to for now, but needed their own project to stop the bleeding.

Commodore’s deal involved licencing the Lorraine’s chips. Why not just buy the whole company? Gould was on board and after tight negotiations struck a deal. Aside from burning money there was no need to buy Amiga. The final paperwork took longer, but the deal was in the bag.

By late July, Tramiel fired nearly everyone involved in the 8-bit product lines to focus on the RBP. Commodore’s injunction slowed down RBP development. He needed leverage against Commodore. Jack's son Leonard Tramiel found the $500,000 cheque from Amiga along with the loan agrement and showed it to his father.

Tramiel renegotiated with Warner, claiming Atari’s value dropped at the time of sale by the loss of the Amiga deal, forgetting he told Atari to cash the cheque. Warner transferred the Amiga contract to Atari Corp. In August his legal team filed a fraud lawsuit against Commodore and Jay Miner. The lawsuit requested a permanent injunction to stop Commodore using the Amiga chips and $100 million in damages.

If Tramiel’s strategy was to stop Commodore from buying Amiga Corporation it didn’t work. Commodore’s purchase completed as lawsuits intensified. The rest of 1984 was spent freeing up staff at the new Commodore-Amiga and Atari.

Each computer had hardware but neither had a functioning Operating System. Commodore bought and licenced Digital Research’s GEM desktop. When Atari publicly announced they’d use it, Commodore dropped GEM.

The Amiga hardware was almost ready but there was no functioning Operating System. At the January 1985 CES show Commodore focused on their new C128. There were only two major personal computer players there: Commodore, and their old enemy Atari. The C128 would be the second most advanced system present after the Apple Macintosh if it wasn’t for something in the Atari area.

Substack doesn't handle Youtube timestamps but you can see the Atari area from 9 minutes into the video above.

Although Atari’s 65XE and 130XE would compete with the C64 and C128, Shiraz Shivji’s Rock Bottom Price “Jackintosh” was on stage wooing the audience.

Like the Apple Macintosh it had a GUI interface, a 3.5” floppy disk drive, a Motorola 68000 CPU and 128kb of RAM but at under $400! There were plans for a 256kb and even massive 512kb version that would go on sale for $600. Above Atari’s area hung the words, “Power Without The Price”.

Shivji’s Atari 130ST display units were hollow cases, but people could see them. The Commodore Amiga was nowhere to be seen. Instead of talking about about computers, Commodore released a statement about now being a Forbes 500 company.

At the June 1985 Summer CES exhibition Commodore again focused solely on the C128. Atari introduced the Atari 260STD at $499 and announced the 520ST was already shipping in Canada and Europe. This wasn’t true but it no longer mattered.

By the end of June the Amiga hardware was complete but the software was unfinished. Commodore Amiga pulled in engineers from other parts of Commodore and MetaComCo in the UK to help finish the Operating System. It was buggy and crashed often but by mid-July it mostly worked. There was however, another problem. The Kickstart ROM needed to start the computer wasn’t ready. Without it the Amiga was an expensive brick. An expensive workaround pushed up prices even more.

By the start of July Commodore was in serious trouble. The SX-64 and new Plus/4 were dead in the water and the C128 wasn’t selling. Commodore shares were almost worthless. Commodore’s banks grumbled about calling in loans.

Irving Gould replaced the Commodore CEO with former PepsiCo exec Thomas Rattigan. Commodore needed a big win to make it through the year. Gould agreed a massive $25 million marketing budget for the rest of 1985 just for the Amiga. Most of this was for the Christmas season but a large amount was put aside for Commodore’s first ever launch event. There was only one problem.

Commodore didn’t have 25 million dollars.

At 6:30pm on the 23rd of July 1985, hundreds of people sat in the Vivian Beaumont theater at New York’s Lincoln center. They were all waiting for the unveiling of Commodore’s new Amiga computer.

Head of Software Engineering Bob Pariseau acted as master of ceremonies. He showed off the Amiga’s Intuition desktop with a multitasking Boing demo. The crowd roared at the sound of live performances of digitised tomtoms and electric guitars. They gushed at the animations. Then they saw the Amiga emulate an IBM PC, display spreadsheets on Lotus 1-2-3 for MS-DOS. While waiting for it to load, Pariseau said,

“I apologise for the delay but it takes exactly as long to load Lotus 1-2-3 on an Amiga computer as it takes on an IBM PC”

After Pariseau ended with the Boing ball demo, he handed over to Andy Warhol. Andy Warhol played with a paint package on a digitized capture of pop star Debbie Harry on stage. The result looked like his Marilyn Monroe paintings which is all that mattered. The launch ended with a ballet animation set to music.

Attendees came to a lobby area filled with 3rd-party developers. Electronic Arts, Infocom and others showed off new Amiga products. Commodore Amiga had pulled it off. Jay Miner’s personal super computer was here, live in stereo.

As great a moment as it was, it was too late. Atari had shipped the 520ST worldwide. The Amiga’s $1295 price tag was worth every penny. For $799 you could have an Atari 520ST, Mouse, Disk Drive, software and monochrome monitor, right now.

Hitting The Market

The Amiga was almost complete. The system needed to be mass-produced, marketed and sold. Commodore sold products through low-cost chains. Jack Tramiel used high-end specialists for the PET and bait-and-switched them over the VIC-20 and Commodore 64. Many specialists would never sell Commodore products again.

The smart thing would be to mass produce as cheaply as possible, build everything as Commodore had done, make it too attractive for retailers to reject and run adverts with a big name extolling the Amiga’s features, like the VIC-20 ad below.

This was not what happened. In fact, this was nearly the opposite of what happened.

The Amiga was a revolutionary computer so far ahead of it’s time few people understood it. It was also expensive. K-Mart wouldn’t sell a $1295 computer next to $300 Commodore 128s or even $799 Atari 520STs.

Nobody knew how to define the Amiga, least of all Commodore’s marketing department. This lead to some peak 1980s I-don’t-know-what-I’m-watching commercials, like the infamous mind voyager commercial, above.

New CEO Thomas Rattigan didn't understand the Amiga. He hired marketing executives from his previous industry. They brought in Nabisco, who produced ads for food products. They also brought in the Ted Bates agency. Instead of understanding the Amiga, collectively they made this:

Compare the two adverts above to Will Shatner’s VIC-20 advert earlier. To back up the TV spots, Commodore’s marketing team took out black and white print adverts extolling old timey values to promote a futuristic super-machine with 4096 colours!

Every computer needs a killer app - an application so incredible users couldn’t live without it. For the Apple II it was the first personal computer spreadsheet, VisiCalc. For MS-DOS it was Lotus 1-2-3, then Wordstar. For the Apple Macintosh it was Aldus Pagemaker. For all it’s amazing hardware, the Amiga had nothing at launch.

Game company Electronic Arts had made their careers on the Commodore 64 and weren’t about to abandon Commodore yet. In September 1985 they released a rewrite of an internal PC art package called Deluxe Paint. It’s hard to overestimate how much Deluxe Paint changed digital art. It was the Amiga's first killer app.

Original photo above by Kaiiv (de.wikipedia), with editing by Wikipedia user Pixel8.

Professionals wanted Deluxe Paint. Artists wanted Deluxe Paint. Getting Deluxe Paint from Electronic Arts was easy. Getting the Amiga needed to run it was impossible.

The banks stopped lending Commodore money. Commodore struggled to pay already spooked manufacturing suppliers who stopped shipping products without up-front payment. Commodore just about made these payments but Amigas didn’t arrive in volume until November just in time for COMDEX.

COMDEX was the Computer Dealer’s Exhibition. Commodore’s dealer relationships were critical if Commodore were going to survive the winter. Atari planned a big push to woo dealers and Commodore needed to compete. All the major players were there except one - Commodore.

Commodore had run out of money.

This episode of the Computer Chronicles TV show compares the Amiga and ST, with a segment on the fall Comdex show at 2:30 in. Unlike Commodore, Atari had the ST and third-party developers everywhere. On the 520STs were bouncing ball demos. When asked about Commodore’s lack of presence, Jack Tramiel told journalists,

“We sell more Atari 520STs than Commodore sells Amigas, and we sure want to sign up more dealers.”

Commodore held a single press conference where they announced they were selling all the Amigas they could make. But Commodore had no money, almost no Amigas, was up to it’s eyeballs in debt and the banks would lend no more.

Irving Gould even sold his company jet to keep the lights on. Admittedly he sold it to another company he owned but it was the thought that counts. On the subject of counting thoughts, Commodore sold around 40,000 Amigas in 1985. To do this, they spent $40,000,000 on marketing and advertising, or about $800 per $1295 machine sold.

The European Market

By January 1986 Commodore sold 10,000 units a month. Commodore’s European sales slightly exceeded US sales but the Amiga wasn’t sold there. In West Germany and the UK the C128 was warmley received but people really wanted the Amiga. There was one problem. The Amiga wouldn’t work with European displays.

The Amiga used the American NTSC TV system. European displays were completely different. A colour NTSC system hooked up to a European PAL or SECAM system would present a flickering black and white mess due to timing differences. Imagine if seconds were 15% shorter in Europe than the US. Now imagine all the things that might go wrong as a result. It would be mid-1986 before a PAL Amiga would be ready and the company was on the ropes.

The January 1986 Winter CES show came around again with no sign of Commodore. The Atari ST with 512kb of RAM and a colour monitor was no $999. Atari announced their new 1040 ST with a mighty 1Mb of RAM at under $1000.

Tramiel’s C64 was the only thing between his former company’s survival and total oblivion. Commodore were drowning in costs. People gone, factories closed. Retailers were wary of stocking the Amiga. Aside from Microsoft BASIC, Microsoft wouldn’t release Amiga software. Other than a handful of Atari ST game ports to the Amiga, almost nobody wrote Amiga games. His revenge was complete. Jack Tramiel had won.

Irving Gould asked the West German team to work on an expandable business market Amiga. Meanwhile in the US an idea formed from the cost-reduced C64 project.

Photo above taken by Bill Bertram

The Atari 520ST was killing Commodore. The only thing keeping them alive was the cost-reduced C64. A cost-reduced Amiga could compete with the Atari 520ST. If it was cheap enough it might even outsell the 520ST. If they could get it out in time, it might just save Commodore. But what would become the Amiga 500 is another Amiga story…

Things you might have missed

This is very short as the Amiga story pushed right up against Subtack’s limits. I hurt my back out after the last issue and couldn’t get shots of comet NEOWISE, but I’m mostly better now.

The ISS is planning some Amateur SSTV action over the next week. I’ll keep an eye/ear/antenna out but my Amateur Radio exam is next week so they won’t be my first QSO.

I think Super Morrissey Bros’ “This Charming Man” is a nice tribute to Jack Tramiel.

I’ll leave you with this quote I doubt that Jack Tramiel would’ve understood by a far greater man, Nelson Mandela:

“If you want to make peace with your enemy, you have to work with your enemy. Then he becomes your partner”

If you’ve enjoyed reading Tales From The Dork Web, please share an issue with someone you think might enjoy reading it. If you haven’t subscribed, you can do so below. I’ll be back in a fortnight with more Tales From The Dork Web.