Atari had been fairly successful with a home version of Pong in the mid-1970s, and the next logical step was a home video game system that could play a variety of different games. Atari's system, mainly created by Joe Decuir, Harold Lee, Ron Milner, and Steve Meyer, was leaps and bounds ahead of previous multi-game systems such as the Magnavox Odyssey, the Fairchild Channel F, and the RCA Studio II. Atari's system ran off a 1.19 MHz 6507 processor, contained 4K of ROM and 128 bytes of RAM, and could display graphics in either black and white or full color. The individual circuit boards for each individual game would be enclosed in plastic cartridges for durability and ease of use.
Atari didn't have enough capital to actually produce the system until after the company was purchased by Warner Communications for $28 million (supposedly, Warner executive vice president Manny Gerard saw a prototype of the system and said, "Holy shit, this is going to take over the world!"). The system was enclosed in a console with a faux woodgrain finish, six silver switches, and a cartridge slot; the console was put in a box with two plastic and rubber joysticks, two plastic paddle controllers, a TV adapter box, and a Combat game cartridge; and the boxes went on sale in the United States in November 1977 as the Atari Video Computer System, model number CX2600, list price $199. Eight other cartridges produced by Atari were available separately:
However, the VCS sold poorly at first. Most people had gotten bored with playing Pong at home by this point, and people didn't want to buy another home video game that would end up sitting in the closet.
But then Space Invaders came along in 1979. Its immense popularity in the arcades caused a bump in sales for home systems, including the VCS, and Atari acted quickly to sign with Space Invaders creator Taito to get exclusive rights to produce a home video game version. Atari's Space Invaders cartridge came out in early 1980, and sales of the VCS soared, to an estimated two million in just the U.S. by mid-1980.
Atari's coin-op division had a big hit with Asteroids at around the same time, and a VCS cartridge soon followed; Atari's Missile Command came out a year later and was yet another hit, both in arcades and at home.
Atari also signed deals with other arcade game manufacturers, notably Williams and Namco, to adapt their games for the VCS. In 1982, Namco's Pac-Man took the arcades by storm, and Atari rushed out a VCS version. Sales of the cartridge were strong, and Atari even began including Pac-Man instead of Combat with the VCS, now officially known as the Atari 2600 after updates to the packaging and the console itself put that name on both. However, most Pac-Man game players were disappointed by the blocky graphics and lackluster sound effects that weren't even up to the standards of previous Atari releases, to say nothing of the arcade version of Pac-Man. That year, Atari also signed up to create a game based on the hit movie "E.T.," and the game that was released turned out to be another disappointment.
Third party software producers began to also create games for the Atari 2600. The first was Activision, created by several disgruntled former Atari programmers. Atari sued, but eventually settled and allowed other companies to produce games in exchange for a small royalty payment.
Also in 1982, Atari introduced a more advanced video game system, the Atari 5200, to compete with Coleco's new Colecovision system. The 2600 remained in production and continued to sell well, especially after Atari dropped its price to under $100. Sales were disappointing for the 5200, which was incompatible with 2600 cartridges.
By 1983, the market for home video games had become pretty much saturated, and many of the third party producers went out of business. However, Atari saw opportunity, and in May 1984, announced another new video game system, the Atari 7800. Atari had learned its lesson from the slow sales of the 5200, and the 7800 would be completely compatible with cartridges for the 2600. Then, a couple months later, Warner Communications unloaded the struggling Atari on a group headed by former Commodore executive Jack Tramiel. The new owners of Atari put the 7800 on hold to fully concentrate on the home computer line, and development languished. However, even with virtually no marketing and no new cartridges, about one million Atari 2600s were sold during 1985 worldwide, thanks to the large back catalog of games.
Then Nintendo's NES arrived in America, and suddenly home video game systems were hot again. Atari competed by finally releasing the 7800 in 1987, and simultaneously releasing a redesigned 2600 as the Atari 2600 Jr. at the low, low list price of $49. A few new 2600 cartridges followed from Atari, including Jr. Pac-Man, Q*Bert, and Donkey Kong, as well as from a few new third party producers.
The brief revival was merely a last gasp for the 2600. The system went out of production in the U.S. by 1989, and worldwide within the next couple of years. Its place in history would be secure, though, as the best-selling home video game system of all time, a record unlikely to ever be broken because other systems are unlikely to remain on sale for 11-plus years the way the 2600 did.