Mattel enters the market
Mattel Electronics launched the Intellivision in 1979 — first as a test market in Fresno, California, then nationally in 1980. The hardware was meaningfully more capable than the Atari 2600: a 16-bit General Instruments CP1610 processor, a display chip capable of showing more colours with more on-screen objects, and a 16-direction disc controller rather than the 2600's 8-direction joystick. Mattel's internal name for the concept — Intelligent Television — communicated the positioning: this was not a game machine but a home entertainment system with game capability, a proposition that would be revisited every decade by every subsequent console entrant who wanted to justify a premium price.
Atari's response to Mattel's challenge was initially dismissive, then litigious. In 1980, Atari filed a complaint with the Federal Trade Commission alleging that Mattel's television advertising was misleading — that the comparisons between Intellivision and 2600 sports games shown in ads used computer-generated imagery that overstated the difference rather than actual game footage. The FTC investigation ultimately found Mattel's advertising insufficiently substantiated and required disclaimers. It did not stop Mattel's marketing, which was aggressive and effective: Intellivision spokesman George Plimpton — a patrician author and amateur athlete whose brand was gentlemanly competence — appeared in advertising demonstrating Intellivision's superior football and baseball simulations with an air of mildly surprised authority. The ads worked. By 1982, Mattel had sold approximately 3 million Intellivision units.
The Intellivision's genuine advantages
The Intellivision's hardware advantages over the 2600 were real in specific categories. Sports games — particularly the official Major League Baseball, NFL Football, and NBA Basketball titles licensed by the actual sports leagues — showed the hardware difference clearly. The Intellivision's sprites had more detail, moved more smoothly, and followed rules that more closely approximated actual sports. Atari's 2600 sports games, constrained by hardware that had been designed primarily around arcade action games, looked notably cruder in direct comparison.
The Intellivision's controller was a different matter. The flat disc and twelve-button numeric keypad — each game came with plastic overlays that labelled the keypad buttons for that specific game — was ergonomically uncomfortable for extended play and poorly suited to the twitch-reaction arcade conversions that drove 2600 sales. Pac-Man, Space Invaders, and their peers had been designed for 8-direction joystick input. The Intellivision disc was imprecise in ways that mattered for fast-twitch action. Mattel's hardware was demonstrably superior for sports simulations and demonstrably inferior for arcade conversions, which meant the console war's outcome depended substantially on which genre players valued.
Mattel's attempt to move beyond games — the Intellivision System Changer add-on that allowed 2600 cartridges to play on the Intellivision, and the planned Keyboard Component that would have made the Intellivision a home computer — illustrated the tension in their positioning. The home computer add-on was announced in advertising, never adequately delivered, and eventually resulted in a consent decree with the FTC requiring refunds to consumers who had bought systems partly on the basis of the computer promise. The promise-and-retreat pattern was a feature of the industry's early marketing, not unique to Mattel, but Mattel's case was large enough to draw regulatory attention.
Coleco's entry and the leapfrog
The Connecticut Leather Company — Coleco — had been in the toy business since 1932, producing wading pools and plastic moulded toys before pivoting to electronic games with the Telstar home Pong consoles in the mid-1970s. The ColecoVision launched in August 1982 at $175 and immediately leapfrogged both the 2600 and the Intellivision on hardware capability. The ColecoVision's Zilog Z80 processor and TMS9928A video chip supported hardware sprites, better colour depth, and — crucially — near-arcade-quality ports of titles including Zaxxon and the pack-in Donkey Kong, which was close enough to the arcade original to make the hardware case without explanation.
Coleco's strategy was direct: demonstrate the gap between ColecoVision's arcade fidelity and competitors' ports in head-to-head comparisons. The Donkey Kong port bundled with the system served this purpose almost perfectly. Atari's 2600 Donkey Kong, released the same year, was a compromised port that removed a level and used simplified graphics. The ColecoVision version retained more of the arcade original's structure and visual quality. Players who had experienced the arcade game had a clear reference point for comparison.
Both Atari and Mattel responded with adapter peripherals: Atari's 2600 Expansion Module #1 allowed ColecoVision owners to play 2600 cartridges, and Mattel produced the System Changer for the same purpose. These were partly defensive moves to maintain software library access and partly acknowledgements that the ColecoVision's hardware had created a genuine competitive threat. By late 1982, the home console market had three significant competitors for the first time, each with distinct hardware, distinct software libraries, and distinct price points. The market had also reached the level of saturation and quality inconsistency that would produce the 1983 collapse. All three companies were eliminated from the home console market simultaneously — not by each other but by the structural failure of the market they had collectively created.
What the first war established
The Atari-Intellivision-ColecoVision conflict established several patterns that recurred in every subsequent console generation. Hardware specification comparison as marketing — a faster processor, more colours, better arcade conversions — became the standard vocabulary of console advertising. The sports game versus arcade action split that differentiated Intellivision and 2600 became the template for how consoles could be differentiated by game type rather than just hardware. The third-party publisher as a dependent variable — whoever had the better software licenses had the better console, independent of hardware — was established when Coleco's Donkey Kong license gave them a launch title that no amount of hardware specification could duplicate.
The failure mode of all three companies also established a pattern. Each invested in hardware capable of sustaining a business built on software royalties, then discovered that the software market's collapse eliminated the royalty revenue that hardware pricing was premised upon. Mattel Electronics, which had been profitable at the peak, reported losses of $300 million in 1983 and 1984 and was shut down by Mattel Inc. in 1984. Coleco abandoned the ColecoVision and launched the Adam home computer, which failed commercially; the company went bankrupt in 1988. Atari's story is more complex but equally terminal for the 2600-era management.
The companies that survived the crash — Nintendo and eventually Sega — learned different lessons from the first console war than the participants had. The survivor's lesson was not "build better hardware" but "control the software": Nintendo's licensing system, designed specifically to prevent the publisher proliferation that had destroyed consumer trust in the 2600 era, was the direct application of the first war's most important lesson.