I was very young, but I don't recall anyone referring to it as a crash until 20 years later. At the time it just seemed like Atari came out, ran it's course, and then the NES came out and blew it away.
Because the crash was a business issue. Players never saw anything bad happen; quite the contrary. The price of games went to the floor. Literally, most Atari games ended up in clearance bins for pennies on the dollar.
The business side was absolutely destroyed. Atari was broken up and sold off by its parent company. Every other 3rd party developer went out of business (or took enormous losses and closed their game division) except for Activision, which survived by the skin of its teeth by pivoting to computer games and spent years digging itself back up to profitability. Retailers lost so much money that the whole concept of "video games" became anathema, which is why Nintendo had to pitch it as a general "entertainment system" and sell it with the light gun and ROB the Robot (basically as decoys for the retail buyers) just to get a tiny foothold back on retail shelves in their NYC test market and prove out the market again.
