The VCS, like Pong, was originally only sold by Sears and the sales of small handhelds, like Simon, overshadowed Atari VCS's success in it's first year. The VCS was eventually sold elsewhere as Sears continued to release game consoles branded as "Sears Video Arcade" and cartridges were released under the brand name "Tele-Games".
Even the VCS's mediocre success during the handheld game craze managed to blow RCA's attempt at a gaming console out of the water. First off, RCA's Studio II was black and white only and how could that compete with Atari's full color VCS?
On a side note, Ralph Baer approached RCA first about producing the Odyssey. The whole thing was pretty much a done deal, except that RCA didn't like the idea of getting into a license agreement with Ralph's current employer, which had to be part of the deal as most of the work leading up to the working prototype of Odyssey was done at that facility. RCA backed out and Magnavox picked up the ball. Ouch! That had to hurt for RCA to later find out that the Odyssey sold over 100,000 units in its first year.
Another arcade giant, Bally, made an attempt to break the home game console market in 1978 with the release of the "Professional Arcade", later renamed the Astrocade. The Astrocade was cool, and I'm surprised it didn't catch on. It allowed for four players, had four games built into ROM, a fair quantity of cartridges and even came with a cartridge for BASIC so user could use the optional keyboard to write programs in BASIC and save them to the optional tape recorder. Not bad.
Magnavox had a tad more success than Bally in 1978 with it's Odyssey2. Odyssey2 not only succeeded somewhat because of Magnavox's existing reputation as a home videogame console manufacturer, but also because the Odyssey2 featured a built in QWERTY keyboard that was rarely used by gamers in the United States, but helped with it's success with a number of educational titles overseas.
The Odyssey2 used a number of preset characters, similar to what a handheld LCD game would use, that made a lot of the games look the same, but because of this idea the graphics were better overall and lacked the flicker that Atari VCS games were often plagued with.
Meanwhile, Atari's game designers are getting ticked off because Atari absolutely refused to give any credit for their creations. This prompts the designers of the VCS cartridge "Adventure" to integrate the industry's first "Easter Egg". The designer's name is actually hidden in the game.
In 1979, a console finally hit the market that was able to put a notch in the large piece of the pie Atari had a hold of. Mattel introduced the first 16-bit game system (although all of the games were only 10-bit): The Intellivision.
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