Editing Atari 2600 (section)

==History==
{{VG timeline
|title=Atari VCS/2600 timeline
|align=right
|range1=1972:1976
|range1_color=#FFFF01 #999900
|range2=1977:1985
|range2_color=#0CEB51 #229B22
|range3=1986:1992
|range3_color=#99FFFF #006666
|1972=Formation of [[Atari, Inc.]]
|1974=Acquisition of [[Cyan Engineering]]
|1975=Debut of the [[MOS 6502]]
|1976=Sale of Atari to [[Warner Communications]]
|1977=Launch of Atari VCS
|1979=Formation of [[Activision]]
|1980=Release of ''[[Space Invaders]]'' and ''[[Adventure (1980 video game)|Adventure]]''
|1981=First bank-switched game: ''[[Asteroids (video game)|Asteroids]]''
|1982a=Rebranding to Atari 2600 (November)
|1982b=Release of ''[[Pac-Man (Atari 2600 video game)|Pac-Man]]'' and ''[[E.T. the Extra-Terrestrial (video game)|E.T.]]''
|1983=[[Video game crash of 1983]]
|1984=Sale of Atari to [[Jack Tramiel]]
|1986=Release of US$50 model
|1990=Final game from Atari: ''[[Klax (video game)|Klax]]''
|1992=Discontinuation
}}

Atari, Inc. was founded by [[Nolan Bushnell]] and [[Ted Dabney]] in 1972. Its first major product was ''[[Pong]]'', released in 1972, the first successful [[arcade game|coin-operated video game]].<ref name="inc bushnell">{{Cite magazine|url = https://www.inc.com/magazine/20090401/the-gamer.html|title = Nolan Busnell is Back in the Game|last = Chafkin, Max|date = April 1, 2009|magazine = [[Inc. (magazine)|Inc.]]|access-date = September 11, 2018|archive-date = January 14, 2019|archive-url = https://web.archive.org/web/20190114051424/https://www.inc.com/magazine/20090401/the-gamer.html|url-status = live}}</ref> While Atari continued to develop new arcade games in following years, ''[[Pong]]'' gave rise to a number of competitors to the growing arcade game market. The competition along with other missteps by Atari led to financial problems in 1974, though recovering by the end of the year.<ref name="gamasutra history atari"/> By 1975, Atari had released a [[Home Pong|''Pong'' home console]], competing against [[Magnavox]], the only other major producer of home consoles at the time. Atari engineers recognized, however, the limitation of custom [[logic programming|logic]] integrated onto the circuit board, permanently confining the whole console to only one game.<ref name="gamespy history p. 1">{{cite web | url = http://classicgaming.gamespy.com/View.php?view=Articles.Detail&id=401 | title = The 2600 Story – Part I | first = Marty | last = Goldberg | date = January 4, 2008 | archive-url = https://web.archive.org/web/20131013220343/http://classicgaming.gamespy.com/View.php?view=Articles.Detail&id=401 | archive-date = October 13, 2013 | access-date = September 11, 2018 | work = [[GameSpy]] }}</ref> The increasing competition increased the risk, as Atari had found with past arcade games and again with dedicated home consoles. Both platforms are built from integrating discrete electro-mechanical components into circuits, rather than programmed as on a [[mainframe computer]]. Thus, development of a console had cost at least {{US$|100000|1975|about=yes|round=-3|long=no}} plus time to complete, but the final product only had about a three-month shelf life  until becoming outdated by competition.<ref name="gamasutra history atari">{{cite web | url = https://www.gamasutra.com/view/feature/130414/the_history_of_atari_19711977.php?print=1 | title = The History of Atari: 1971–1977 | first = Steve | last = Fulton | date = November 6, 2007 | access-date = September 11, 2018 | work = [[Gamasutra]] | archive-date = September 12, 2018 | archive-url = https://web.archive.org/web/20180912021902/http://www.gamasutra.com/view/feature/130414/the_history_of_atari_19711977.php?print=1 | url-status = live }}</ref>

By 1974, Atari had acquired [[Cyan Engineering]], a [[Grass Valley, California|Grass Valley]] electronics company founded by Steve Mayer and Larry Emmons, both former colleagues of Bushnell and Dabney from [[Ampex]], who helped to develop new ideas for Atari's arcade games. Even before the release of the home version of ''Pong'', Cyan's engineers, led by Mayer and Ron Milner, had envisioned a home console powered by new programmable [[microprocessor]]s capable of playing Atari's current arcade offerings. The programmable microprocessors would make a console's design significantly simpler and more powerful than any dedicated single-game unit.<ref name="atari fun chp5">{{cite book | title = Atari Inc: Business is Fun | first1 = Marty | last1 = Goldberg | first2 = Curt | last2 = Vendel | year = 2012 | isbn = 978-0985597405 | publisher = Sygyzy Press | chapter=Chapter 5 | url=https://archive.org/details/atariincbusiness0000gold/ | url-access=registration | chapter-url=https://archive.org/details/atariincbusiness0000gold/page/192/mode/2up | chapter-url-access=registration}}</ref> However, the cost {{US$|100–300|long=no}} of such chips was far outside the range that their market would tolerate.<ref name="gamespy history p. 1"/> Atari had opened negotiations to use Motorola's new [[Motorola 6800|6800]] in future systems.<ref name=edge>{{cite book |first=Brian |last=Bagnall |title=Commodore: A company on the edge |date=2011 |publisher=Variant Press |isbn=978-0973864960}}</ref>

===MOS Technology 6502/6507===
In September 1975, [[MOS Technology]] debuted the [[MOS Technology 6502|6502 microprocessor]] for {{US$|25|long=no}} at the Wescon trade show in San Francisco.<ref name = Comp1975>{{Cite journal | title = MOS 6502 the second of a low cost high performance microprocessor family | journal = Computer | volume = 8 | issue = 9 | pages = 38–39 | publisher = IEEE Computer Society | date = September 1975 | url = http://commons.wikimedia.org/wiki/File:MOS_6501_6502_Ad_Sept_1975.jpg | doi = 10.1109/C-M.1975.219074 | access-date = September 28, 2020 | archive-date = February 24, 2021 | archive-url = https://web.archive.org/web/20210224154043/https://commons.wikimedia.org/wiki/File:MOS_6501_6502_Ad_Sept_1975.jpg | url-status = live | url-access = subscription }}</ref><ref name="atari fun chp5"/> Mayer and Milner attended, and met with the leader of the team that created the chip, [[Chuck Peddle]]. They proposed using the 6502 in a game console, and offered to discuss it further at Cyan's facilities after the show.<ref name=edge/>

Over two days, MOS and Cyan engineers sketched out a 6502-based console design by Meyer and Milner's specifications.<ref name="ieee decuir">{{cite journal |title = Atari Video Computer System: Bring Entertainment Stories Home | first = Joe | last = Decuir | journal = IEEE Consumer Electronics Magazine | date = July 2015 | doi = 10.1109/MCE.2015.2421572 | pages =59–66 | doi-access = free }}</ref> Financial models showed that even at {{USD|25|long=no}}, the 6502 would be too expensive, and Peddle offered them a planned [[MOS Technology 6507|6507 microprocessor]], a cost-reduced version of the 6502, and MOS's [[MOS Technology 6532|RIOT]] chip for [[input/output]]. Cyan and MOS negotiated the 6507 and RIOT chips at {{USD|12|long=no}} a pair.<ref name=edge/><ref>Oral History of Chuck Peddle.  Computer History Museum  X7180.2014  https://www.computerhistory.org/collections/catalog/102739938 {{Webarchive|url=https://web.archive.org/web/20210611034012/https://www.computerhistory.org/collections/catalog/102739938 |date=June 11, 2021 }}  https://www.youtube.com/watch?v=enHF9lMseP8 {{Webarchive|url=https://web.archive.org/web/20210611034818/https://www.youtube.com/watch?v=enHF9lMseP8 |date=June 11, 2021 }}  time index: 0:59:10 and 1:19:24</ref> MOS also introduced Cyan to [[Microcomputer Associates, Incorporated|Microcomputer Associates]], who had separately developed debugging software and hardware for MOS, and had developed the JOLT Computer for testing the 6502, which Peddle suggested would be useful for Atari and Cyan to use while developing their system.<ref name="atari fun chp5"/> Milner was able to demonstrate a proof-of-concept for a programmable console by implementing ''[[Tank (video game)|Tank]]'', an arcade game by Atari's subsidiary [[Kee Games]], on the JOLT.<ref name="atari fun chp5"/>

As part of the deal, Atari wanted a second source of the chipset. Peddle and Paivinen suggested [[Synertek]] whose co-founder, Bob Schreiner, was a friend of Peddle.<ref name="gamespy history p. 1"/> In October 1975, Atari informed the market that it was moving forward with MOS. The Motorola sales team had already told its management that the Atari deal was finalized, and Motorola management was livid. They announced a lawsuit against MOS the next week.<ref name=edge/>

===Building the system===
[[File:Atari 2600 Prototype at CHM.jpg|thumb|right|The first Stella prototype on display at the [[Computer History Museum]]]]

By December 1975, Atari hired [[Joseph C. Decuir|Joe Decuir]], a recent graduate from [[University of California, Berkeley]] who had been doing his own testing on the 6502. Decuir began debugging the first prototype designed by Mayer and Milner, which gained the [[codename]] "Stella" after the brand of Decuir's bicycle. This prototype included a [[breadboard]]-level design of the graphics interface to build upon.<ref name="gamasutra history atari"/><ref name="atari fun chp5"/> A second prototype was completed by March 1976 with the help of [[Jay Miner]], who created a chip called the [[Television Interface Adaptor]] (TIA) to send graphics and audio to a television.<ref name="proto">{{cite web|author=Curt Vendel |url=http://www.atarimuseum.com/videogames/consoles/2600/proto2600.html |title=The Atari VCS Prototype |publisher=Atarimuseum.com |access-date=March 30, 2014 |archive-url = https://archive.today/20130117094934/http://www.atarimuseum.com/videogames/consoles/2600/proto2600.html |archive-date = January 17, 2013}}</ref> The second prototype included a TIA, a 6507, and a [[ROM cartridge]] slot and adapter.<ref name="gamasutra history atari"/>

As the TIA's design was refined, [[Al Alcorn]] brought in Atari's game developers to provide input on features.<ref name="atari fun chp5"/> There are significant limitations in the 6507, the TIA, and other components, so the programmers creatively optimized their games to maximize the console.<ref name="ieee decuir"/> The console lacks a [[framebuffer]] and requires games to instruct the system to generate graphics in synchronization with the [[electron gun]] in the [[cathode-ray tube]] (CRT) as it scans across rows on the screen. The programmers found ways to "[[#Racing the beam|race the beam]]" to perform other functions while the electron gun scans outside of the visible screen.<ref name="Wired racing">{{cite magazine | url = https://www.wired.com/gamelife/2009/03/racing-the-beam/ | title = Racing the Beam: How Atari 2600's Crazy Hardware Changed Game Design | first = Chris | last = Kohler | magazine = Wired | date = 2009-03-19 | access-date = 2010-08-09 | archive-date = July 27, 2010 | archive-url = https://web.archive.org/web/20100727184654/http://www.wired.com/gamelife/2009/03/racing-the-beam/ | url-status = live }}</ref>

Alongside the electronics development, Bushnell brought in Gene Landrum, a consultant who had just prior consulted for [[Fairchild Camera and Instrument]] for its upcoming [[Fairchild Channel F|Channel F]], to determine the consumer requirements for the console. In his final report, Landrum suggested a living room aesthetic, with a [[wood grain]] finish, and the cartridges must be "idiot proof, child proof and effective in resisting potential static [electricity] problems in a living room environment". Landrum recommended it include four to five dedicated games in addition to the cartridges, but this was dropped in the final designs.<ref name="atari fun chp5"/> The cartridge design was done by James Asher and Douglas Hardy. Hardy had been an engineer for Fairchild and helped in the initial design of the Channel F cartridges, but he quit to join Atari in 1976. The interior of the cartridge that Asher and Hardy designed was sufficiently different to avoid patent conflicts, but the exterior components were directly influenced by the Channel F to help work around the static electricity concerns.<ref name="atari fun chp5"/><ref name="fc fairchild carts"/>

Atari was still recovering from its 1974 financial woes and needed additional capital to fully enter the home console market, though Bushnell was wary of being beholden to outside financial sources.> Atari obtained smaller investments through 1975, but not at the scale it needed, and began considering a sale to a larger firm by early 1976. Atari was introduced to [[Warner Communications]], which saw the potential for the growing video game industry to help offset declining profits from its film and music divisions. Negotiations took place during 1976, during which Atari cleared itself of liabilities, including settling a patent infringement lawsuit with [[Magnavox]] over [[Ralph H. Baer]]'s patents that were the basis for the [[Magnavox Odyssey]].<ref name="atari fun chp5"/> In mid-1976, Fairchild announced the Channel F, planned for release later that year, beating Atari to the market.<ref name="fc fairchild carts">{{cite web | url = https://www.fastcompany.com/3040889/the-untold-story-of-the-invention-of-the-game-cartridge | title = The Untold Story Of The Invention Of The Game Cartridge | first = Benj | last = Edwards | date = January 22, 2015 | access-date = April 9, 2021 | work = [[Fast Company]] | archive-date = April 13, 2019 | archive-url = https://web.archive.org/web/20190413014941/https://www.fastcompany.com/3040889/the-untold-story-of-the-invention-of-the-game-cartridge | url-status = live }}</ref>

By October 1976, Warner and Atari agreed to the purchase of Atari for {{US$|28 million|long=no}}.<ref name="atari fun chp5"/> Warner provided an estimated {{US$|120 million|long=no}} which was enough to fast-track Stella.<ref name="gamasutra history atari"/><ref name="inc bushnell 1984">{{cite magazine | url = https://www.inc.com/magazine/19841001/136.html | title = When The Magic Goes | first = Steve | last = Goll | date = October 1, 1984 | access-date = April 2, 2021 | magazine = Inc. | archive-date = March 10, 2021 | archive-url = https://web.archive.org/web/20210310075000/http://www.inc.com/magazine/19841001/136.html | url-status = live }}</ref> By 1977, development had advanced enough to brand it the "Atari Video Computer System" (VCS) and start developing games.<ref name="gamasutra history atari"/>

===Launch and success===
[[File:Atari-2600-Light-Sixer-FL.jpg|thumb|The second VCS model has lighter plastic molding and shielding, and a more angular shape, than the 1977 launch model.]]
[[File:Atari-2600-Woody-FL.jpg|thumb|From 1980, the VCS has only four front switches and a capital-letters logotype.]]

The unit was showcased on June 4, 1977, at the Summer [[Consumer Electronics Show]] with plans for retail release in October. The announcement was purportedly delayed to wait out the terms of the Magnavox patent lawsuit settlement, which would have given Magnavox all technical information on any of Atari's products announced between June 1, 1976, and June 1, 1977.<ref name="atari fun chp5"/> However, Atari encountered production problems during its first batch, and its testing was complicated by the use of cartridges.

[[Image:Combat.svg|thumb|''[[Combat (video game)|Combat]]'', the pack-in game at launch]]

The Atari VCS was launched in September 1977 at {{US$|199|1977|about=yes|round=-1|long=no}}, with two joysticks and a ''[[Combat (video game)|Combat]]'' cartridge; eight additional games were sold separately.<ref>{{cite book |last=Forster |first=Winnie |title=The encyclopedia of consoles, handhelds & home computers 1972–2005 |year=2005 |publisher=GAMEPLAN |isbn=3-00-015359-4|page=27}}</ref> Most of the [[launch games]] were based on arcade games developed by Atari or its subsidiary [[Kee Games]]: for example, ''Combat'' was based on Kee's ''[[Tank (video game)|Tank]]'' (1974) and Atari's ''[[Jet Fighter (video game)|Jet Fighter]]'' (1975).<ref name="gamasutra history atari"/> Atari sold between 350,000 and 400,000 Atari VCS units during 1977, attributed to the delay in shipping the units and consumers' unfamiliarity with a swappable-cartridge console that is not dedicated to only one game.<ref name="gamasutra atari 2"/>

In 1978, Atari sold only 550,000 of the 800,000 systems manufactured. This required further financial support from Warner to cover losses.<ref name="gamasutra atari 2">{{cite web | url = http://www.gamasutra.com/view/feature/3766/atari_the_golden_years__a_.php?print=1 | title = Atari: The Golden Years – A History, 1978–1981 | first = Steve | last = Fulton | date = August 21, 2008 | access-date = September 11, 2018 | work = [[Gamasutra]] | archive-date = October 10, 2018 | archive-url = https://web.archive.org/web/20181010011309/http://www.gamasutra.com/view/feature/3766/atari_the_golden_years__a_.php?print=1 | url-status = dead }}</ref> Bushnell pushed the Warner Board of Directors to start working on "Stella 2", as he grew concerned that rising competition and aging tech specs of the VCS would render the console obsolete. However, the board stayed committed to the VCS and ignored Bushnell's advice, leading to his departure from Atari in 1979. Atari sold about 600,000 VCS systems in 1979, bringing the installed base to a little over 1.3 million.<ref name="tcwv1">{{cite book |last1=Smith |first1=Alexander |title=They Create Worlds: The Story of the People and Companies That Shaped the Video Game Industry, Vol I |date=2019 |publisher=CRC Press |isbn=9781138389908 |pages=458, 466, 518 |edition=1}}</ref>

Atari obtained a license from [[Taito]] to develop a VCS conversion of its 1978 arcade hit ''[[Space Invaders]]''. This is the first officially licensed arcade conversion for a home console.<ref name="RG-41">{{Cite magazine|date=September 2007|title=The Definitive Space Invaders|url=https://archive.org/stream/retro_gamer/RetroGamer_041#page/24/mode/2up|magazine=[[Retro Gamer]]|publisher=[[Imagine Publishing]]|issue=41|pages=24–33}}</ref> Atari sold 1.25 million ''Space Invaders'' cartridges and over 1 million VCS systems in 1980, nearly doubling the install base to over 2 million, and then an estimated 3.1 million VCS systems in 1981.<ref name="tcwv1" /> By 1982, 10 million consoles had been sold in the United States, while its best-selling game was ''[[Pac-Man (Atari 2600 video game)|Pac-Man]]''<ref>{{cite book |title=[[Guinness World Records Gamer's Edition]] |publisher=[[Guinness World Records]] |year=2008 |isbn=1-904994-21-0 <!-- |url=https://books.google.com/books?id=OJQFSlyMEfAC --> |page=24 |quote=10 million – number of Atari 2600 consoles sold by 1982.}}</ref> at over {{nowrap|8 million}} copies sold by 1990.{{efn|name=PacMan|7,271,844 in 1982. 684,569 in 1983.<ref name="Atari">{{cite book |title=Cartridge Sales Since 1980 |publisher=[[Atari Corp.]]}} Via {{cite episode |title=The Agony & The Ecstasy |series=Once Upon Atari |date=August 10, 2003 |number=4 |minutes=23 |publisher=Scott West Productions}}</ref> {{formatnum:{{#expr:21279+15784}}|}} in 1986. 61,685 in 1987. 3,885 in 1988. 34,374 in 1989. 2,166 in 1990.<ref name="Vendel">{{Cite web|last=Vendel|first=Curt|date=May 28, 2009|title=Site News|url=http://www.atarimuseum.com/whatsnew/2009-MAY-28.html|url-status=dead|archive-url=https://web.archive.org/web/20101206090952/http://www.atarimuseum.com/whatsnew/2009-MAY-28.html|archive-date=2010-12-06|access-date=2021-11-27|website=Atari Museum}}</ref>}} ''Pac-Man'' propelled worldwide Atari VCS sales to {{nowrap|12 million}} units during 1982, according to a November 1983 article in ''[[InfoWorld]]'' magazine.<ref name="hubner19831128">{{cite magazine |last1=Hubner |first1=John |last2=Kistner |first2=William F. |title=The Industry: What went wrong at Atari? |magazine=[[InfoWorld]] |date=28 November 1983 |volume=5 |issue=48 |pages=151–158 (157) |url=https://books.google.com/books?id=sy8EAAAAMBAJ&pg=PA151 |publisher=[[InfoWorld Media Group, Inc.]] |issn=0199-6649 |access-date=December 1, 2021 |archive-date=October 20, 2023 |archive-url=https://web.archive.org/web/20231020183655/https://books.google.com/books?id=sy8EAAAAMBAJ&pg=PA151#v=onepage&q&f=false |url-status=live }}</ref> An August 1984 ''[[InfoWorld]]'' magazine article says more than {{nowrap|15 million}} Atari 2600 machines were sold by 1982.<ref>{{cite magazine |last1=Bisson |first1=Gisselle |title=Atari: From Starting Black to Auction Block |magazine=[[InfoWorld]] |date=6 August 1984 |volume=6 |issue=32 |page=52 |url=https://books.google.com/books?id=HC8EAAAAMBAJ&pg=PA52 |publisher=[[InfoWorld Media Group, Inc.]] |issn=0199-6649}}</ref> A March 1983 article in ''[[IEEE Spectrum]]'' magazine has about 3 million VCS sales in 1981, about 5.5 million in 1982, as well as a total of over 12 million VCS systems and an estimated 120 million cartridges sold.<ref name="ieee8304">{{cite journal |last1=Perry |first1=Tekla |last2=Wallich |first2=Paul |title=Design case history: the Atari Video Computer System |journal=IEEE Spectrum |date=March 1983 |volume=20 |issue=3 |pages=45, 50, 51|doi=10.1109/MSPEC.1983.6369841 |s2cid=2840318 }}</ref>

In Europe, the Atari VCS sold 125,000 units in [[Video games in the United Kingdom|the United Kingdom]] during 1980,<ref>{{cite magazine |title=Technology: The games that aliens play |magazine=[[New Scientist]] |date=18 December 1980 |volume=88 |issue=1232–1233 |page=782 |url=https://books.google.com/books?id=ainC3-wuz_kC&pg=PA782 |publisher=[[Reed Business Information]] |issn=0262-4079 }}{{Dead link|date=April 2024 |bot=InternetArchiveBot |fix-attempted=yes }}</ref> and 450,000 in [[West Germany]] by 1984.<ref>{{cite magazine |title=EG Goes Continental: Europe Joins the Game World |magazine=[[Electronic Games]] |date=January 1984 |volume=2 |issue=23 |pages=46–7 |url=https://archive.org/details/ElectronicGames/Electronic%20Games%20Issue%2023%20%28January%201984%29/page/n46|access-date=2 December 2021}}</ref> In France, where the VCS released in 1982, the system sold 600,000 units by 1989.<ref name="SVM">{{cite magazine |title=Guerre Dans Le Salon |trans-title=War in the Living Room |magazine=[[Science & Vie|Science & Vie Micro]] |date=December 1989 |issue=67 |pages=126–8 |lang=fr |url=https://abandonware-magazines.org/affiche_mag.php?mag=48&num=2280&album=oui |access-date=December 8, 2021 |archive-date=December 8, 2021 |archive-url=https://web.archive.org/web/20211208070551/https://abandonware-magazines.org/affiche_mag.php?mag=48&num=2280&album=oui |url-status=live }}</ref> The console was distributed by [[Epoch Co.]] in Japan in 1979 under the name "Cassette TV Game", but did not sell as well as Epoch's own Cassette Vision system in 1981.<ref>{{Cite web|url=https://www.theguardian.com/games/2023/jul/18/40-years-of-the-nintendo-famicom-the-console-that-changed-the-games-industry|title=40 years of the Nintendo Famicom – the console that changed the games industry &#124; Games &#124; The Guardian|website=amp.theguardian.com|date=July 18, 2023 |access-date=July 18, 2023|archive-date=July 18, 2023|archive-url=https://web.archive.org/web/20230718133759/https://amp.theguardian.com/games/2023/jul/18/40-years-of-the-nintendo-famicom-the-console-that-changed-the-games-industry|url-status=live |last1=Packwood |first1=Lewis }}</ref>

In 1982, Atari launched its second programmable console, the [[Atari 5200]]. To standardize naming, the VCS was renamed to the "Atari 2600 Video Computer System", or "Atari 2600", derived from the manufacture part number CX2600.<ref>{{cite web | url = https://www.gamedeveloper.com/design/a-history-of-gaming-platforms-atari-2600-video-computer-system-vcs | archive-url = https://web.archive.org/web/20140513034048/http://www.gamasutra.com/view/feature/131956/a_history_of_gaming_platforms_.php?print=1 | archive-date = 2014-05-13 | title = A History of Gaming Platforms: Atari 2600 Video Computer System/VCS | first1 = Matt | last1= Barton | first2 = Bill | last2 =Loguidice | date = February 28, 2008 | access-date = September 11, 2018 | url-status = live | work = [[Gamasutra]] }}</ref> By 1982, the 2600 cost Atari about {{US$|long=no|40}} to make and was sold for an average of {{US$|125|1982|round=-1|long=no}}. The company spent {{US$|long=no|4}}.50 to {{US$|long=no|6}} to manufacture each cartridge, plus {{US$|long=no|1}} to {{US$|long=no|2}} for advertising, wholesaling for {{US$|18.95|1982|long=no|round=-1}}.<ref name="hubner19831128" />

===Third-party development===
[[Activision]], formed by Crane, Whitehead, and Miller in 1979, started developing third-party VCS games using their knowledge of VCS design and programming tricks and began releasing games in 1980. ''[[Kaboom! (video game)|Kaboom!]]'' (1981) and ''Pitfall!'' (1982) are among the most successful with at least one and four million copies sold, respectively.<ref name="gi activision start">{{cite magazine | url = https://www.gameinformer.com/b/features/archive/2013/02/26/activisionaries-how-four-programmers-changed-the-game-industry-forever.aspx | title = Activisionaries: How Four Programmers Changed The Game Industry | first = Ben | last = Reeves | date = February 26, 2013 | access-date = April 2, 2021 | magazine = [[Game Informer]] | archive-date = January 27, 2021 | archive-url = https://web.archive.org/web/20210127015005/https://www.gameinformer.com/b/features/archive/2013/02/26/activisionaries-how-four-programmers-changed-the-game-industry-forever.aspx | url-status = live }}</ref> In 1980, Atari attempted to block the sale of the Activision cartridges, accusing the four of intellectual property infringement. The two companies settled out of court, with Activision agreeing to pay Atari a licensing fee for their games. This made Activision the first third-party video game developer and established the licensing model that continues to be used by console manufacturers for game development.<ref name="Gamasutra">{{cite web |url=https://www.gamedeveloper.com/business/the-history-of-activision |title=The History Of Activision |work=Gamasutra |first=Jeffrey |last=Flemming |access-date=December 30, 2016 |url-status=live |archive-url=https://web.archive.org/web/20161220122651/http://www.gamasutra.com/view/feature/1537/the_history_of_activision.php?print=1 |archive-date=December 20, 2016}}</ref>

Activision's success led to the establishment of other third-party VCS game developers following Activision's model in the early 1980s,<ref>{{cite magazine |url=https://books.google.com/books?id=ZD4EAAAAMBAJ&pg=PP1 |title=Atari Sues to k.o. Competition |magazine=InfoWorld |volume=2 |issue=13 |date=August 4, 1980 |page=1 |access-date=March 30, 2014 |archive-date=October 20, 2023 |archive-url=https://web.archive.org/web/20231020183642/https://books.google.com/books?id=ZD4EAAAAMBAJ&pg=PP1#v=onepage&q&f=false |url-status=live }}</ref><ref>{{cite magazine |url=https://books.google.com/books?id=ej0EAAAAMBAJ&pg=PA1 |title=Atari attempts to gobble software competition |author=John Markoff |magazine=InfoWorld |date=December 21, 1981 |page=1 |volume=3 |issue=31 |access-date=March 30, 2014 |archive-date=October 20, 2023 |archive-url=https://web.archive.org/web/20231020183658/https://books.google.com/books?id=ej0EAAAAMBAJ&pg=PA1#v=onepage&q&f=false |url-status=live }}</ref><ref>{{cite book |url=https://books.google.com/books?id=deBFx7QAwsQC&q=atari+activision+1981&pg=PA6 |title=Encyclopedia of Video Games: The Culture, Technology, and Art of Gaming |volume=2 |author=Mark P. Wolf |publisher=ABC-CLIO |year=2012 |isbn=9780313379369 |page=6 |access-date=March 30, 2014 |archive-date=October 20, 2023 |archive-url=https://web.archive.org/web/20231020183636/https://books.google.com/books?id=deBFx7QAwsQC&q=atari+activision+1981&pg=PA6 |url-status=live }}</ref> including [[U.S. Games]], [[Telesys]], [[Games by Apollo]], [[Data Age]], [[Zimag]], [[Mystique (company)|Mystique]], and [[CommaVid]]. The founding of [[Imagic]] included ex-Atari programmers. Mattel and Coleco, each already producing its own more advanced console, created simplified versions of their existing games for the 2600. Mattel used the [[M Network]] brand name for its cartridges. Third-party games accounted for half of VCS game sales by 1982.<ref>{{cite news|last=Rosenberg|first=Ron|title=Competitors Claim Role in Warner Setback|url=https://pqasb.pqarchiver.com/boston/access/666912291.html?FMT=ABS&FMTS=ABS:FT&type=current&date=Dec+11%2C+1982&author=Ron+Rosenberg+Globe+Staff&pub=Boston+Globe+%28pre-1997+Fulltext%29&desc=COMPETITORS+CLAIM+ROLE+IN+WARNER+SETBACK&pqatl=google|access-date=March 6, 2012|newspaper=[[The Boston Globe]]|date=December 11, 1982|page=1|archive-date=November 7, 2012|archive-url=https://web.archive.org/web/20121107073803/http://pqasb.pqarchiver.com/boston/access/666912291.html?FMT=ABS&FMTS=ABS:FT&type=current&date=Dec+11%2C+1982&author=Ron+Rosenberg+Globe+Staff&pub=Boston+Globe+%28pre-1997+Fulltext%29&desc=COMPETITORS+CLAIM+ROLE+IN+WARNER+SETBACK&pqatl=google|url-status=dead}}</ref>

===Decline and redesign===
In addition to third-party game development, Atari also received the first major threat to its hardware dominance from the ColecoVision. Coleco had a license from [[Nintendo]] to develop a version of the arcade game ''[[Donkey Kong (1981 video game)|Donkey Kong]]'' (1981), which was bundled with every ColecoVision console. Coleco gained about 17% of the hardware market in 1982 compared to Atari's 58%.<ref name="ieee history">{{cite journal | title = Innovation and Competition in Standard-Based Industries: A Historical Analysis of the U.S. Home Video Game Market | first1 = Scott | last1 =Gallager | first2 = Seung | last2 =Ho Park | date = February 2002 | journal = IEEE Transactions on Engineering Management | publisher = [[IEEE Technology and Engineering Management Society]] | volume = 49 | issue = 1 | pages = 67–82 | doi = 10.1109/17.985749 }}</ref> With third parties competing for market share, Atari worked to maintain dominance in the market by acquiring licenses for popular arcade games and other properties to make games from. ''Pac-Man'' has numerous technical and aesthetic flaws, but nevertheless more than 7 million copies were sold. Heading into the 1982 [[economics of Christmas|holiday shopping]] season, Atari had placed high sales expectations on ''[[E.T. the Extra-Terrestrial (video game)|E.T. the Extra-Terrestrial]]'', a game programmed in about six weeks.  Atari produced an estimated four million cartridges,<ref name="kassarmaster">Bruck, ''Master of the Game: Steve Ross and the Creation of Time Warner'', pp. 179–180</ref> but the game was poorly reviewed, and only about 1.5 million units were sold.<ref name="retroign-tas">{{cite web | last = Buchanan | first = Levi | url = http://retro.ign.com/articles/903/903024p1.html | title = IGN: Top 10 Best-Selling Atari 2600 Games | website = IGN | date = August 26, 2008 | access-date = September 21, 2009 | archive-url = https://web.archive.org/web/20110726161836/http://retro.ign.com/articles/903/903024p1.html | archive-date = July 26, 2011 | url-status = live }}</ref>

Warner Communications issued revised earnings guidance in December 1982 to its shareholders, having expected a 50% year-to-year growth but now only expecting 10–15% due to declining sales at Atari.<ref name="atariyears">{{cite magazine|last1=Crawford|first1=Chris|title=The Atari Years|magazine=The Journal of Computer Game Design|date=1991|volume=5}}</ref><ref name="Snopes">{{cite web | first1=Barbara | url=http://www.snopes.com/business/market/atari.asp | title=Buried Atari Cartridges | publisher=[[Snopes.com]] | date=May 10, 2011 | access-date=September 10, 2011 | first2=David P | last1=Mikkelson | last2=Mikkelson | archive-date=September 11, 2012 | archive-url=https://archive.today/20120911032250/http://www.snopes.com/business/market/atari.asp | url-status=live }}</ref> Coupled with the oversaturated home game market, Atari's weakened position led investors to start pulling funds out of video games, beginning a cascade of disastrous effects known as the [[video game crash of 1983]].<ref name="atariyears"/> Many of the third-party developers formed prior to 1983 were closed, and Mattel and Coleco left the video game market by 1985.<ref name="down many times">{{cite book | last = Ernkvist | first = Mirko  | chapter = Down many times, but still playing the game: Creative destruction and industry crashes in the early video game industry 1971–1986 | year = 2008 | pages = 161–191 | title = History of Insolvancy and Bankruptcy | publisher = Södertörns högskola | editor-first =Karl | editor-last=Gratzer | editor-first2=Dieter | editor-last2=Stiefel | isbn = 978-91-89315-94-5 }}</ref>

In September 1983, Atari sent 14 truckloads of unsold Atari 2600 cartridges and other equipment to a landfill in the New Mexico desert, later labeled the [[Atari video game burial]].<ref>{{cite news|title=Atari Parts Are Dumped|newspaper=The New York Times|date=28 September 1983|url=https://www.nytimes.com/1983/09/28/business/atari-parts-are-dumped.html|url-access=limited|access-date=May 20, 2018|archive-date=February 9, 2017|archive-url=https://web.archive.org/web/20170209222223/http://www.nytimes.com/1983/09/28/business/atari-parts-are-dumped.html|url-status=live}}</ref> Long considered an [[urban legend]] that claimed the burial contained millions of unsold cartridges, the site was excavated in 2014, confirming reports from former Atari executives that only about 700,000 cartridges had actually been buried.<ref>{{cite magazine |last1=Poeter |first1=Damon |title=Atari's Buried E.T. Games Up for Sale |url=https://www.pcmag.com/news/ataris-buried-et-games-up-for-sale |magazine=PC Magazine |date=May 31, 2014 |access-date=September 29, 2020 |archive-date=January 18, 2021 |archive-url=https://web.archive.org/web/20210118140812/https://www.pcmag.com/news/ataris-buried-et-games-up-for-sale |url-status=live }}</ref> Atari reported a {{US$|536 million|long=no}} loss for 1983 as a whole,<ref name="Ultimate History">{{cite book |first= Steven | last= Kent | authorlink = Steven L. Kent|year=2001 |title=The Ultimate History of Video Games |publisher=[[Three Rivers Press]] |isbn=0-7615-3643-4 |url=https://archive.org/details/ultimatehistoryofvideogamesrevisited/}}</ref>{{rp|ch14}} and continued to lose money into 1984, with a {{USD|425 million|long=no}} loss reported in the second quarter.<ref name="sale"/> By mid-1984, software development for the 2600 had essentially stopped except that of Atari and Activision.<ref name="holyoak19840530">{{cite news | url=https://news.google.com/newspapers?id=PqZNAAAAIBAJ&pg=7081%2C6575510 | title=Here are ColecoVision's jewels | work=Deseret News | date=May 30, 1984 | access-date=January 10, 2015 | author=Holyoak, Craig | pages=4 WV | archive-date=May 10, 2023 | archive-url=https://web.archive.org/web/20230510234406/https://news.google.com/newspapers?id=PqZNAAAAIBAJ&pg=7081,6575510 | url-status=live }}</ref>

Warner, wary of supporting its failing Atari division, started looking for buyers in 1984. Warner sold most of the assets of Atari's counsumer electronics and home computer divisions to [[Jack Tramiel]], the founder of [[Commodore International]], in July 1984 in a deal valued at {{US$|240 million|long=no}}, though Warner retained Atari's arcade business. Tramiel was a proponent of [[personal computer]]s, and halted all new 2600 game development soon after the sale.<ref name="sale">{{Cite news
 |last=Sange
 |first=David E.
 |title=Warner Sells Atari To Tramiel
 |newspaper=[[The New York Times]]
 |pages=Late City Final Edition, Section D, Page 1, Column 6, 1115 words
 |date=July 3, 1984
 |url=https://www.nytimes.com/1984/07/03/business/warner-sells-atari-to-tramiel.html
 |url-status=live
 |url-access=limited
 |archive-url=https://web.archive.org/web/20161118132248/http://www.nytimes.com/1984/07/03/business/warner-sells-atari-to-tramiel.html
 |archive-date=November 18, 2016
}}</ref>

The North American video game market did not recover until about 1986, after [[Nintendo]]'s [[History of the Nintendo Entertainment System#North American launch (1985-1986)|1985 launch]] of the [[Nintendo Entertainment System]] in North America. [[Atari Corporation]] released a redesigned model of the 2600 in 1986, supported by an ad campaign touting a price of "under 50 bucks".<ref>{{cite web|title=Atari 2600 1986 Commercial 'The Fun is Back'|url=https://www.youtube.com/watch?v=m752qiGqSm4|website=YouTube| date=December 21, 2011 |access-date=May 20, 2018|archive-date=August 17, 2019|archive-url=https://web.archive.org/web/20190817092507/https://www.youtube.com/watch?v=m752qiGqSm4&gl=US&hl=en|url-status=live}}</ref> With a large library of cartridges and a low price point, the 2600 continued to sell into the late 1980s. Atari released the last batch of games in 1989–90 including ''[[Secret Quest]]''<ref>{{cite web|title=Secret Quest|url=http://www.atarimania.com/game-atari-2600-vcs-secret-quest_7464.html|website=Atari Mania|access-date=May 20, 2018|archive-date=May 20, 2018|archive-url=https://web.archive.org/web/20180520124517/http://www.atarimania.com/game-atari-2600-vcs-secret-quest_7464.html|url-status=live}}</ref> and ''Fatal Run''.<ref>{{cite web|title=Fatal Run|url=http://www.atarimania.com/game-atari-2600-vcs-fatal-run_16746.html|website=Atari Mania|access-date=May 20, 2018|archive-date=May 20, 2018|archive-url=https://web.archive.org/web/20180520124402/http://www.atarimania.com/game-atari-2600-vcs-fatal-run_16746.html|url-status=live}}</ref> By 1986, over {{nowrap|20 million}} Atari VCS units had been sold worldwide.<ref>{{cite news |title=Where every home game turns out to be a winter |url=https://www.newspapers.com/clip/18547690/the-guardian/ |access-date=3 October 2021 |work=[[The Guardian]] |date=6 March 1986 |pages=15 |archive-date=October 3, 2021 |archive-url=https://web.archive.org/web/20211003220523/https://www.newspapers.com/clip/18547690/the-guardian/ |url-status=live }}</ref><ref name="Pollack">{{cite news |last1=Pollack |first1=Andrew |title=Video Games, Once Zapped, In Comeback |url=https://www.nytimes.com/1986/09/27/business/video-games-once-zapped-in-comeback.html |newspaper=The New York Times |date=September 27, 1986 |publication-date=September 27, 1986 |page=A1 |no-pp=yes |access-date=November 2, 2015 |url-access=limited |archive-date=June 6, 2021 |archive-url=https://web.archive.org/web/20210606050154/https://www.nytimes.com/1986/09/27/business/video-games-once-zapped-in-comeback.html |url-status=live }}</ref> The final Atari-licensed release is the PAL-only version of the arcade game ''[[Klax (video game)|KLAX]]'' in 1990.

After more than 14 years on the market, 2600 production ended in 1992,{{sfn|Montfort|Bogost|2009|p=137}} along with the [[Atari 7800]] and [[Atari 8-bit computers]]. Despite this fact, Atari continued sales in Europe for years to come. It cost less than £39.99 and was mainly distributed through mail order chains. In 1991, 200,000 units were sold on the continent and in it was a bestseller at [[Littlewoods]] stores in UK.<ref>{{cite journal |title=Atari triumphs in Index |journal=CTW |issue=362 |page=4 }}</ref> After the fall of communism, Atari attempted to legally introduce the Atari 2600 and 7800 to the former Eastern Bloc countries, with small price being main advantage of the system, but Atari was defeated by even more cheaper and easily available clones called "Rambo TV Game 2600" (advertised with the 1982 movie character [[First Blood|Rambo]] played by [[Sylvester Stallone]]), containing up to several hundred built-in games.<ref>{{Citation |url=https://www.kommersant.ru/doc/44974 |title=Бурный рост приводит к аномалиям|date=April 14, 1993 }}</ref><ref>{{Cite journal | title = Atari 2600 |journal = Bajtek | issue = 4/1992 | page = 14}}</ref><ref>{{Citation |url=https://www.retrobajty.cz/video-computer-game-console-rambo-hry/ |title=Video Computer Game Console (Rambo hry)|date=February 16, 2020 }}</ref><ref>{{Citation |url=https://dzen.ru/a/YtBQy5-AFWLXBLu8 |title=Игровая приставка Рэмбо. Китайский аналог легенды из США}}</ref> In Western Europe, last stocks of the 2600 and 7800 were sold until Summer/Fall of 1995.<ref>{{cite web | url=https://atarimuseum.nl/history-of-atari-benelux/ | title=Atari Benelux Timeline – Atarimuseum.nl | access-date=May 16, 2023 | archive-date=May 16, 2023 | archive-url=https://web.archive.org/web/20230516214620/https://atarimuseum.nl/history-of-atari-benelux/ | url-status=live }}</ref>