Atari was a well known company even before the second half of the seventies. Anyone who liked to play arcades knew of them. Yes, there were a few other companies on the market, but their arcades were among the best. But Atari wanted more
Where to move from arcades? Any successful company has the decide how it will use the success. How to grow and which markets to move to. Atari had a clear plan in their minds as even before they made their first arcade machine, they had their first home console. This console was made by Ralf Baer and it was presented to the market in 1972 under the name Odyssey by Magnavow and just in 1972 it sold over 120 000 pieces. Yes it was primitive and the sales were hurt by Magnavow claims that it works only with their TV (which wasn’t true). So Nolan Bushnell came to the conclusion that getting Atari on that market is a priority. He wanted to make a home version of Pong.
Atari had to hurry, because in 1974 competion came to the home video game market. It was the console Video Action, but it cost 499 $ (not that much less than an actual arcade) so obviously it wasn’t that successful. Then on Christmas 1975 another similar game came to the market with the name TV Tennis. That cost 129.99 $. But the quality wasn’t that good so this one didn’t sell well either. So if Atari wanted to succeed, they needed to do it right.
Atari was of course watching the competition closely, so they understood that if they wanted to be both cheap and successful, they had to get the whole game on to a single integrated circuit. And using a microprocessor wasn’t an option, they were just too expensive. But there was a problem. Nobody in Atari knew how to make such a circuit. And here’s where Atari was lucky. In the end of 1973 Harold Lee came to the company. Before Atari he worked in Standard Microsystems and making such special chips was exactly what he did there.
The basic idea seemed easy. The whole game logic was split by Harold into a few basic modules. He brought each of them to Atari where Al Alcorn with his wife made a prototype. And after a few weeks of testing, they could start making the chip itself. And after many many nights working in Applicon CAD System on the chip, in July of 1975 Atari finally had the design for their chip.
