In the early 1970's, video arcade games gained commercial success for the first time. The American public was introduced to Pong, Tank, and other interactive video games which populated amusement parks, bars, and arcades. The games were successful enough to cre-ate interest for home versions, so in 1975 Atari released Home Pong and it was a smash hit. Other companies such as Magnavox and Coleco followed suit and released their own dedicated console games. Then in 1976, Fairchild Camera and Instrument introduced the Channel F system, the first cartridge based home video game system. The industry recognized that cartridge systems were the fu-ture of video gaming, and began development in that direction. In January 1977, RCA released the Studio II, another cartridge based system, although it only projected in black and white and seemed to be focused on educational titles. Then, in October 1977, Atari re-leased the Atari VCS (Video Computer System) with an initial offering of nine games. This system, later renamed the Atari 2600, took the industry by storm and dominated the marketplace for years to come.

Because of oversupply, the Christmas season of 1977 was very rough on the video game industry, and the Atari 2600 was the only system that managed to emerge unscathed. Atari enjoyed strong sales in 1978 and a fantastic holiday season, as Atari released more games such as Outlaw, Spacewar, and Brea-kout. Internally however, Atari was at odds. Nolan Bushnell, the inventor of pong and founder of Atari, wound up leaving the company and purchased Pizza Time Theater, which later became the successful Chuck E. Cheese! In 1979 Atari continued their trend and released 12 more games which met with continued success. However, Atari was now facing some stiffer competition from the Mattel Intellivision and the Mag-navox Odyssey2. Atari needed a mega-hit in 1980 in order to squash the competition, and they found it in the home version of a game from Japan called Space Invaders. It was so popular that people were buying the Atari 2600 just so they could play Space Invaders at home. Following that, Atari re-leased Adventure, which was the first video game to contain an Easter Egg - placing an object in a certain area revealed the programmer's name, Warren Robinett. 1980 was important for another reason - the creation of the first ever third party software producer, Activision.

The company was formed by four Atari employees who were unsatisfied with the working conditions at the company. They released four games initially: Dragster, Fishing Derby, Checkers and Boxing. The games were very well received by the public, and revealed that the Atari 2600 was capable of better games than Atari themselves had been producing. Atari tried to prevent Activision from selling games, but they failed and Activision grossed $70 million that year. By 1981, the video game industry was basically a horse race between the 2600 and the Intellivision. While the Intellivision was technologically superior in some respects, the 2600 continued toof Activision, another software development group called Imagic was formed. They would not release any games until 1982 however. Another company, Games by Apollo, was formed in Texas and released several games that year. lead in sales. Atari released the home version of Asteroids, which was a huge success. Inspired by the success
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