In 1976, Coleco released the Telstar console and sold over $100 million worth of units according to The Ultimate History of Video Games. Fourteen different models of the Telstar were manufactured, each coming with its own set of games, all of which were knock offs of prior hits such as Pong and Tank. Pong itself warranted almost two dozen variants.
In August 1976, the oft forgotten Fairfield Channel F was released. The Channel F was the first console that used game cartridges thus allowing gamers access to a much wider variety of games on a single console, an innovation that would leave an indelible mark on the industry. All the major players in the industry aimed to match the achievement in the next generation of releases.
This point marks a period of some stagnation in the video game industry. Coin-operated profits were falling and interest in home consoles (or “TV games”) seemed to slow. Steve Jobs, soon to be a much bigger player, left Atari to start Apple. The stock market and the American economy slowed in a big way. The future of the industry and of the medium itself was unsure. Would video games last?
Atari was sold to Warner Communications for $28 million while keeping Bushnell and the rest of the team on board. In 1977, the company was developing the Atari Video Computer System (the VCS, retroactively named the Atari 2600). Electronics company RCA released Studio II and Magnavox’s Odyssey 2 hit the market in September. Bally and Allied Leisure announced their own entries into the race.
In October, the VCS hit the American public. With it, the gaming joystick hit home consoles and the idea of varying difficulty levels made its debut. Despite these innovations, sales were lackluster around the entire industry during that holiday season. Over the course of the next year, Bushnell repeatedly clashed with and was then dismissed by Warner leadership.