In 1986, Atari released the Atari 7800, three years after Atari’s planned deployment date. The reason behind the delay is largely due to the Atari split up and purchase by Jack Tramiel. From my friend Marty Goldberg, “what happened is Atari folded. It’s Consumer Division assets were purchased by Tramiel who folded it in to his own company (Tramel Technology Ltd.) and TTL was itself renamed to Atari Corporation. Like with the Amiga deal, the 7800 (designed by GCC) contract was with Warner and was simply executed by Atari. It didn’t come with the purchase.
Tramiel had to negotiate with Warner for who owed GCC for the payments of the custom MARIA chip and 10 launch titles. Tramiel finally relinquished and paid GCC in May of ’85, then negotiated for the launch titles and paid that over early Summer. By mid August he was looking to start up an electronic entertainment division again including relaunching the 7800. He lured Mike Katz away from Epyx and by that October they were starting to license additional titles, with the 7800 being officially reintroduced at the January ’86 CES while the NES was still being test marketed.
Above: Atari 7800 game console
However, compared to the Nintendo NES and the Sega Master System, the Atari 7800 was outdated, and despite its compatibility to the 2600, the Atari 7800 was cancelled in 1992 but this would have been a different story if the console had reached the market a few years earlier. Atari was the market leader, but that crown had now passed to another. Gamers wanted the latest and greatest.
Above: Atari 7800 retail box
In 1989, Atari released the Atari Lynx, the first hand-held colour game device. The unit was actually developed by Epyx, which had trouble funding the project. The machine could display an incredible 4096 colours on a 160 x 120 pixel screen.
Above: Atari 7800 graphics
However, Atari once again stole defeat from the jaws of victory. There was high demand for the device, but Atari could not meet demand, leaving people to purchase the colourless Game Boy instead. When Sega released the GameGear in 1991, it ended Atari’s dominance in the colour hand-held market. Moreover, Sega had more titles and began to outsell the Lynx. Atari pulled the Lynx from the market in 1993.