 At the beginning of the 1970s , video games existed almost entirely as novelties passed around by programmers and technicians with access to computers , primarily at research institutions and large companies . The history of video games transitioned into a new era early in the decade , however , with the rise of the commercial video game industry . In 1971 , Bill Pitts and Hugh Tuck developed a coin @-@ operated computer game , Galaxy Game , at Stanford University using a DEC PDP @-@ 11 computer with vector displays . The pair was inspired to make the game by Spacewar ; Tuck had remarked in 1966 while playing the game that a coin @-@ operated version of the game would be very successful . Such a device was unfeasible in 1966 due to the cost of computers , but in 1969 DEC released the PDP @-@ 11 for US $ 20 @,@ 000 ; while this was still too high for a commercially viable product , as most games in arcades cost around US $ 1 @,@ 000 at the time , the pair felt it was low enough to build a prototype to determine interest and optimal per @-@ game pricing . Only prototype units were ever built , though the second prototype was adapted to run up to eight games at once ; after its initial installation at Stanford in September 1971 , the pair met with Nolan Bushnell , who informed them of his own game he was making for a much lower price . 
