History-

Although Atari was the dominant video game company during the first generation of home consoles, they found themselves in a precarious position in the second half of the 1970s. A glut of PONG style consoles saturated the market and overwhelmed demand. In 1976, Fairchild had upped the ante with the release of the Video Entertainment System, which revolutionized home video game consoles. With big names like Bally and Magnavox quickly cooking up their own cartridge based second generation consoles, Atari knew that it had to adapt or be left behind.

In 1976, Atari had already begun work on a new cartridge based system called the Game Brain. However, the Game Brain was not an advanced console, as the game cartridges themselves contained the CPU's needed to run the games. Work on the Game Brain was canceled in favor of a newer and more powerful system. At first, Atari intended to use the "CPU in a game cart" method used in the Game Brain design. That idea was quickly jettisoned as it soon became clear that the console itself would have to be the brains of any advanced system, much like in Fairchild's machine.

Atari went back to the drawing board again. They first needed to design a powerful CPU to run their new console, much like the F8 chip ran the VES. They started with MOS Technology's 6502 chip, one of the most advanced microprocessors at the time. Atari's Grass Valley engineering team, led by Steve Mayer, created a custom chip based off of the 6502 design. This new chip, nicknamed "Stella" (after one engineer's bicycle), turned out to be too expensive to manufacture. Atari brought in Jay Miner, an expert chip designer, who made some modifications to Stella, reducing it's cost.

When Atari designed the console that would house Stella, they took all the best features from their previous PONG systems and improved on them. All games would be in color, have multiple difficulty settings, and the console itself would have detachable joysticks. The most important part of the system was it's frugal use of system memory. Instead of the console hardware controlling most gameplay features, the game carts themselves would handle that workload. This would work to Atari's advantage in the future, as game programmers were not hindered by console memory restrictions.

Although Atari was having some success with their new console design, they did not have the money to finish the work. Nolan Bushnell sold Atari to Warner Communications for 28 million dollars in order to secure the finds to complete work on the console. Thanks to Warner, Atari finished the new machine and in 1977, launched the newly christened Video Computer System. The VCS

The VCS did not sell well in it's first year, moving only 250,000 consoles. This was in part because the home video game market had been severely damaged by the overwhelming amount of PONG clones which had driven down prices. As the console market crashed, it looked like the VCS would fail before it even had a chance to prove itself.

Nolan Bushnell wanted to abandon the fledgling VCS and focus on making a next generation console before their competitors could catch up. His bosses at Warner, including Ray Kassar, a consultant hired to work with Atari, disagreed. Warner, fed up with Bushnell's erratic behavior and his laid back leadership style, forced Bushnell out of the company he created and installed Kassar in his place as CEO of Atari.

Kassar stuck with the VCS, which became one of the lone survivors of the first video game console crash. In 1978, with little competition, Atari's console sold very well. However, the real explosion of the VCS (now commonly referred to as the Atari 2600) happened in 1979, when Atari got the exclusive rights to release a home video game version of the hit arcade game Space Invaders. Space Invaders was gaming's first "killer app", with thousands of consumers buying a 2600 console just to play the game.

The success of the 2600 led to a renaissance in the home console business. Mangnavox, Bally, Mattel, Coleco and others launched second generation consoles of their own. Many third party software companies were formed solely to create games for these consoles. In the face of this increased competitive marketplace, Atari redoubled it's efforts to land exclusive versions of hit arcade games.

This would backfire in 1982 as a very inferior 2600 version of Pac-Man badly damaged the Atari brand and cost the company millions of dollars. Atari would take another major hit when an over hyped version of E.T., which cost Warner over $20 million to acquire the video game rights, was rushed to the marketplace and flopped. This coincided with a marketplace overwhelmed with video game consoles (as it had been before in 1977) and led to the demise of not only the 2600, but the entire video game industry in 1983.

When Atari failed in 1983, their home video game division was sold to Jack Tramiel, who reformed it as Atari Games. Although Atari Games originally focused solely on PC products, the rebirth of the home video game business led Tramiel to re-form Atari's console division. The 2600 was redesigned and re-released in 1986 with the unofficial moniker "Atari 2600Jr.". The 2600Jr. sold marginally well, but it was clearly obsolete compared to Nintendo and Sega's powerful new systems, and was quietly discontinued in 1991.

Click here for Part 2 of our Atari VCS/2600 overview, featuring the different console varieties of Atari's flagship system.