The video game industry was running at around $2.2 billion in early 1983 when it then fell to around $100 million. The decline was over 95%. Recall the reports of Atari buring game cartridges. Atari held 80% of the video game market in 1982 and the stupid management managed to destroy the industry overnight.
The big problem was oversaturation of the US market combined with a flood of new games in 1982. In 1983 there were far fewer world-class games available. Console limitations were a big reason for the shortages.
The aftermath was a real shakeout in the industry. Some console vendors tried to block 3rd party games but they failed. Courts ordered an opening of platforms which allowed for more competition for games. Activision, Electronic Arts and Nintendo had to reposition their operations. The Atari 2600 also saw sales decline.
The North American video game crash had two long-lasting results. The first result was that dominance in the home console market shifted from the United States to Japan. By 1986, three years after its introduction, 6.5 million Japanese homes—roughly 19% of the population—owned a Family Computer, and the company began exporting it to the US.
The Commodore 64 machine got caught up in the downturn but being a home computer helped it survive. Radioshack and their Color Computer also helped the US market recover slowly. Both machines had a BASIC interpreter that allowed consumers to learn about programming.
When the US video game market recovered in the late 1980s the Nintendo NES was by far the dominant console, leaving only a fraction of the market to a resurgent Atari. By 1989, home video game sales in the United States had reached $5 billion, surpassing the 1982 peak of $3 billion during the previous generation.
Nintendo was still very heavy handed in controlling the gaming market. It Independent developers were limited in the number games they could publish. It also required all cartridges to be manufactured by Nintendo, and to be paid for in full before they were manufactured. Cartridges could not be returned to Nintendo, so publishers assumed all the risk.
Other consoles also had platform control but not generally as bad as Nintendo.
PC gaming however continued to evolve. Lower cost machines and hardware improvements allowed more and more homes to purchase machines.