Origins of The Term
The first published use of the phrase "retroactive continuity" is found in Elgin Frank Tupper's 1974 book The theology of Wolfhart Pannenberg.
Pannenberg's conception of retroactive continuity ultimately means that history flows fundamentally from the future into the past, that the future is not basically a product of the past.
The first known printed use of "retroactive continuity" as referring to the altering of history within a fictional work is in All-Star Squadron #18 (cover-dated February 1983) from DC Comics. The series was set on DC's Earth-Two, an alternative universe in which Golden Age comic characters proceed and age subsequent to their first appearances in real time. Thus by the early 1980s Superman was in his 60s and the Batman had died and been succeeded by his daughter, The Huntress, whereas the Superman and Batman of Earth-One, DC's primary universe, are perpetually young to early middle-age adults. All-Star Squadron in particular, was set during World War II on Earth-Two, so it was in the past of an alternative universe, thus all its events had repercussions on the contemporary continuity of the DC multiverse. Each issue literally changed the history of the fictional world in which it was set. In the letters column, a reader remarked that the comic "must make you feel at times as if you're painting yourself into a corner," and "Your matching of Golden Age comics history with new plotlines has been an artistic (and I hope financial!) success."
Writer Roy Thomas responded, "we like to think that an enthusiastic ALL-STAR booster at one of Adam Malin's Creation Conventions in San Diego came up with the best name for it a few months back: 'Retroactive Continuity'. Has kind of a ring to it, don't you think?" The term, possibly in limited similar use before All-Star Squadron #18, then took firm root in the consciousness of fans of American superhero comics.
"Retroactive continuity" was shortened to "retcon", reportedly by Damian Cugley in 1988 on Usenet. Hard evidence of Cugley's abbreviation has yet to surface, though in a Usenet posting on August 18, 1990, Cugley posted a reply in which he identified himself as "The originator of the word 'retcon'." Cugley used the newly-shortened word to describe a development in the comic book Saga of the Swamp Thing, which reinterprets the events of the title character's origin by revealing facts that, up to that point, are not part of the narrative and were not intended by earlier writers. In this case, the revelation is that the titular character's memories are false and he is not who he thinks he is. Alan Moore's retcons often involve false memories, for example Marvelman (aka Miracleman in America), and Batman: The Killing Joke.
Read more about this topic: Retroactive Continuity
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