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By 1979, Nolan Bushnell had sold Atari, Inc. to Warner Communications and left the company over several disagreements with the direction Warner wanted to take the company—particularly with the popular Atari 2600 game console (then known as the Atari Video Game Console or VCS). Bushnell's replacement as CEO, Ray Kassar, showed little respect to developers, giving them no financial compensation for profitable games and refusing them public credit for fear they would be recruited by other game companies. David Crane, one of Atari's programmers, recalled a memo sent by Kassar that listed the best-selling cartridges from the previous year to help guide game ideas; Crane noted that the games he was fully responsible for had brought in over US$20 million for the company but he was still only receiving a US$20,000 salary. Crane, along with Larry Kaplan, Alan Miller and Bob Whitehead, became vocal about the lack of recognition within the company and became known as the "Gang of Four". The group met with Kassar in May 1979 to demand that the company treat developers as record labels treated musicians, with royalties and their names on game boxes. Kaplan, who called the others "the best designers for the [2600] in the world", recalled that Kassar called the four men "towel designers" and claimed that "anybody can do a cartridge".

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