The video game industry as we know it got its start on November 29th, 1972, when Atari officially announced the release of the Pong arcade machine.
Nolan Bushnell had an inkling that video games were going to be big, so he recruited coworker and friend Ted Dabney to create what was essentially the first Silicon Valley startup — the pair invested a whopping $250 each to bring the company to fruition in June of 1972.
But while Bushnell understood the mechanics and circuitry, his real talent — and the real reason video games ultimately succeeded — was in his deal-making ability. He convinced Bally to pay Atari to create a new racing game that could be licensed, and they brought in engineer Allan Alcorn to help develop it.
To start, they gave Alcorn a training exercise: Build a tennis-style game, not unlike the one for the Magnavox Odyssey (legally speaking, so similar there would eventually be a lawsuit). The quality of what Alcorn came up with was so good, Atari decided they should sell that instead of the racing game.
A test machine was installed in Andy Capp's Tavern in Sunnyvale, California, in August of '72, and was an instant hit. In fact, it was so successful Bushnell decided he wanted to sell the machines himself, instead of licensing it to Bally (or Midway, which had also shown interest at this point).
So, he lied — Bushnell told both Bally and Midway that neither was interested in the game, leading both to pass on it. That allowed Atari to develop Pong machines themselves — once they had secured a line of credit, which wasn't easy. At that time video games were lumped in with pinball, which itself was lumped in with the mafia (which, wait, what? Need to look into that more).
They barely kept up with demand as the game blew past pretty much everyone's expectations. By the end of 1974, Atari had sold over 8,000 units, giving it the capital to become a real company. Pong is widely regarded as the first commercially successful video game in history, legitimizing the entire industry.
So when you're blasting some 12-year-old in Call of Duty tonight, take a moment to solemnly thank Nolan Bushnell and his crew for all they gave the world.