It was not the first video game. It was the first commercial success. Back in 1972, people began queueing outside the bar in California where the game first appeared, until one day the machine broke down. Pong's designer, engineer Al Alcorn, arrived and quickly diagnosed the problem as coin overload.

Three years later, the company Atari began selling Pong, with its minimal instructions such as ''avoid missing ball for high score'' - into homes as a console game connected to the television, and a fledgling industry took flight.

''Pong is a small game that has had a big impact,'' said Conrad Bodman, curator of international projects at the Australian Centre for the Moving Image.

''It established the sports game genre. It used sound to create tension and excitement in the game, and it also introduced a two-player format and the notion of competitive one-on-one play.''

Last year, Australians spent $1.5 billion on interactive gaming, according to PricewaterhouseCoopers. Worldwide, $54.7 billion was spent on console, handset, computer, online and wireless games. And this figure was expected to reach almost $77 billion by 2016.

The rules established by Pong, including the one-on-one or ''versus'' play using the language of today's generation, apply for such modern developers as Mark Boulton, who worked at the Australian video game company Blue Tongue Entertainment before it folded last year.

''Most game developers strive to create a product with high replay value, hoping the player will find it addictive,'' Mr Boulton says.

Pong's influence can be seen in any game in which friends' high scores are used to spur players' competitive instincts. But the paddle game nearly did not happen, with the creators at Atari fearing the project was too expensive.

''The integrated circuit boards by themselves cost almost $200, so that was clearly never a consumer product,'' Atari boss Nolan Bushnell said at the time.

Decades later the issue of the cost of gaming technology has not gone away.

Mr Boulton also welcomed the federal government's announcement last month of a $20 million Australia Interactive Games Fund to help local developers, saying the high dollar had made it difficult to compete in an industry already shaken by the global financial crisis, and its reliance on discretionary spending.

This year's Entertainment and Media Outlook released by PwC predicted that the future of the game industry was in mobile devices. While established gamers would continue to invest in traditional consoles and home computers, the report estimated that Australians would spend $400 million on games for smartphones and tablets this year, and that this would increase by more than 11 per cent annually up to 2016.

Melbourne University academic Daniel Golding, who writes and lectures on video games, says games for mobile devices require a huge amount of downloads to turn a profit.

But, he says, designing blockbusters is risky as well, given high production costs and risk of failure.

For ACMI information communications technology manager Paul Cuthbert, it all started with Pong.

The 60-year-old built his own games console from scratch in the mid-1970s, even extending the controller's cord so he could play from the couch. Five years ago he decided to try playing with his children.

''They weren't overly impressed,'' he said. ''They said 'yes dad, but I can do all of that on my iPhone'.''