The Video Game Home Market
While the Magnavox Odyssey failed to create a viable home video game console market, it was not long before such a market finally came into being. Once again it was Atari at the forefront of this new area, bringing the smash hit Pong into the home with a dedicated console designed by Alcorn, Harold Lee, and Bob Brown called the Sears Tele-Game System in 1975. The game system sold 150,000 units in the 1975 Christmas season alone and illustrated the viability of a home video game market. As when Pong first hit the arcades, a large number of imitators prepared to cash in on the success. The most significant of these competitors was Coleco Industries, a toy company originally founded as the Connecticut Leather Company in 1932. Coleco CEO Arnold Greenberg was immediately attracted to the home video game market when he saw Atari's product and hired Eric Bromley away from Midway to design a tennis game for the company. Called the Telstar, the ball-and-paddle console took advantage of the General Instrument AY-3-8500 that the company marketed cheaply as a "pong-on-a-chip" solution and a wide open market caused by no other company receiving their orders from General Instrument on time to supplant Atari's system at the top of the emerging home market after its release around Father's Day 1976. In 1977, Coleco attempted to capitalize on this success with eight additional games including Pong and Tank variants, but these products were failures due to a dock worker strike and other issues that led Coleco to be unable to meet demand in the 1977 holiday season.
While Coleco was floundering, the home market entered a new phase in late 1976 when Fairchild Camera and Instrument released the Fairchild VES, later renamed the Channel F. Retailing for $169.95, the system was the first home console to use cartridges storing ROM information to allow multiple games to be programmed for a single system (as opposed to the circuit cards of the Odyssey that only had a limited capability to change screen output). Rather than being confined to a small selection of games included in the box, consumers could now amass libraries of game cartridges. Retailing for $19.95 each, the cartridges included sports games, board games, educational games, and a couple of primitive shooting games. The system was not particularly successful, but the concept quickly caught on with electronics companies. RCA was the first to get into the new market in early 1977 with the Studio II, Coleco released a system later that year called the Telstar Arcade, and Atari prepared its answer to the new home market. Actually conceived before the VES was released, the Atari VCS was developed by Jay Miner, Larry Wagner, Ron Milner and Joe Decuir and was based around the MOS Technology 6507 processor, a slightly more limited version of that company's popular 6502 processor. Retailing for $249.95 and more powerful than the VES or the Studio II, the system was released in late 1977 with nine games: Combat (a game featuring several variations on Tank that was packaged with the system), Video Olympics (essentially several variations of Pong), Air-Sea Battle, Basic Math, Blackjack, Indy 500, Star Ship, Street Racer, and Surround (a Blockade clone). The system featured multiple controllers including the first joystick on a home system, designed by Steve Bristow, a control device that soon became standard on console systems. In order to insure a big initial release to forestall competitors, Atari head Nolan Bushnell sold the company to Warner Communications to procure enough capital for the launch.
At the same time the home console market was developing, a new market for handheld electronic games began to emerge as well. While early products in this field were not truly video games, using simple LED displays to convey the action, the handheld market represented the beginning of a new avenue for video game entertainment. The first known electronic handheld was a Tic-Tac-Toe game released by a company called Waco in 1972. Toy company Mattel created the first fully digital handhelds in 1976, however, with its first two LED releases Auto Race and Football. Conceived by Mattel marketing director Michael Katz and developed by Richard Chang, the LED games, particularly Football, quickly became successful and established a new handheld market. Coleco became Mattel's biggest competitor when Bromley designed his own LED football game called Electronic Quarterback in 1978, and Coleco ran an ad campaign comparing its obstensively superior products to those of Mattel. This campaign was run by none other than Michael Katz, whom Greenberg lured away from Mattel. As handhelds became popular, the Atari VCS sold poorly after arriving late for the 1977 Christmas shopping season, and the home market became glutted with the Channel F, Studio II, and VCS joined by the Odyssey˛ cartridge system from Magnavox and the Bally Professional Arcade, the home market began to fail during the small crash of 1977–1978. In 1979, the Studio II was discontinued, the rights to the Channel F were sold, after which it quickly disappeared, and Bally sold its consumer products division, ending the run of the Bally Professional Arcade (though it was later re-released by another company as the Bally Professional Computer, later renamed Astrocade, in 1981, failing to have much impact on the market before being discontinued for good in 1985). The VCS and Odyssey˛ remained on the market, but neither one was selling well. Fed up with poor sales by 1978, Warner CEO Steve Ross removed Nolan Bushnell late in the year after a feud over the direction the company should take and replaced him with textile-industry executive Ray Kassar.
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