The new machine launched in October 1977 was called the VCS (Video Computer System).  It had 9 titles at launch.  The VCS was a huge success, consumers queued up at stores that Christmas of 1977 to purchase the machine - the advertisements were everywhere, and it was working.  But as Atari started to boom, embryonic cracks started to appear in the management team - a new regime was slowly being introduced which, new to the old-guard, included clock-cards and dress codes.  The original spirit of the company was changing, and this upset a lot of the original employees.  This type of change is normal, especially when you work for one of the fastest growing companies in the world - but the direction of Atari was changing course as well.

From 1979, home video games were becoming more and more popular. 12 new cartridges were released for the VCS, and more importantly - the first arcade conversion was available for the home market - The Japanese company "Taito" had launched "Space Invaders" and Atari quickly bought the rights.  The VCS was now being purchased for the sole purpose to play Space Invaders - Atari quickly saw the potential of porting arcade games to it's system.  Atari's arcade division was under threat from companies such as Taito, Balley and Williams - but fighting back, Atari had a string of arcade hits, such as Asteroids and Battle Zone (1980).

As a new decade began, the gaming enthusiast saw such titles as Missile Command and Pac-Man released - these software titles ensured massive sales for the company - by 1982, Atari was a $2 billion multi-national with over 10,000 employees world-wide.  Atari was still under attack, most notably on the video game side by CBS Electronics, with it's ColecoVision system.  Not only was it able to play Atari software with it's add-on module, but it had games that you couldn't get for the VCS.  

Atari redesigned it's VCS (which had also seen cosmetic changes over the years) and released the VCS 2600.  The 2600 was smaller and cheaper to manufacture.  It was about this time Warner must have been regretting one thing (among others) - Atari VCS developers we're everywhere - launching more and more titles onto the market, and most of them were not even worthy of being burnt onto an ROM.  This loading on the market of such trashy titles began to turn loyal users away, also the ColecoVision and Intellivision thrust into it's traditional turf had been hurting Atari.