When Fairchild learned of Atari Inc.'s naming, they quickly changed the name of their system to become the Channel F. However, both systems were now in the midst of a vicious round of price-cutting: Pong clones that had been made obsolete by these newer and more powerful machines were sold off to discounters for ever-lower prices. Soon many of the clone companies were out of business, and both Fairchild and Atari Inc. were selling to a public that was completely burnt out on Pong. In 1977, Atari Inc. sold only 250,000 VCSs.
For the first year of production, the VCS was manufactured in Sunnyvale, California. The consoles manufactured there had thick internal RF shielding, and thick plastic molding around the sides and bottom. These added weight to the console, and because all six switches were on the front, these consoles were nicknamed "Heavy Sixers". After this first year, production moved to Hong Kong, and the consoles manufactured there had thinner plastic molding. In 1978, only 550,000 units from a production run of 800,000 were sold, requiring further financial support from Warner to cover losses. This led directly to the disagreements that caused Atari Inc. founder Nolan Bushnell to leave the company in 1978.
Once the public realized it was possible to play video games other than Pong, and programmers learned how to push its hardware's capabilities, the VCS gained popularity. By this point, Fairchild had given up, thinking video games were a passing fad, thereby handing the entire quickly growing market to Atari Inc. By 1979, the VCS was the best-selling Christmas gift (and console), mainly because of its exclusive content, and 1 million units were sold that year.
The all black "Darth Vader" 4-switch model from 1982-
Atari Inc. then licensed the smash arcade hit Space Invaders by Taito, which greatly increased the unit's popularity when it was released in January 1980, doubling sales again to over 2 million units. The VCS and its cartridges were the main factor behind Atari Inc. grossing more than $2 billion in 1980. Sales then doubled again for the next two years; by 1982, the console had sold 10 million units, while its best-selling game Pac-Man sold 7 million copies.
In 1980, the VCS was given a minor revision in which the left and right difficulty switches were moved to the back of the console, leaving four switches on the front. Other than this, these four-switch consoles looked nearly identical to the earlier six-switch models. In 1982, another version of the four-switch console was released without woodgrain. They were nicknamed "Darth Vader" consoles due to their all-black appearance. These were also the first consoles to be officially called "Atari 2600", as the Atari 5200 was released the same year.
During this period, Atari Inc. expanded the 2600 family with two other compatible consoles. They designed the Atari 2700, a wireless version of the console that was never released because of a design flaw. The company also built a sleeker version of the machine dubbed the Atari 2800 to sell directly to the Japanese market in early 1983, but it suffered from competition with the newly released Nintendo Famicom.
In a survey mentioned by Jeff Rovin it is reported that more stores reported breakdowns of the Atari 2600 system than any other, and that Atari repair centers seemed to have the most trouble with consoles manufactured in 1980. In one case it is stated that a system was repaired five times before static electricity from a carpet was discovered as having caused the problem. The controllers were also a source of breakage because of the way they could be gripped by a player holding it with their fist, allowing players to get carried away and over control, which was less likely with other systems released at the time, such as the Odyssey 2, which had controllers that were nearly half its size.