Atari's loss to Activision may have been a boon for the company. When Atari finally agreed to endorse third-party software development for the VCS in exchange for royalties, many companies jumped at the opportunity to cash in on a potentially lucrative market. Unfortunately, these new companies weren't all Activisions.
One of the best was Imagic, another company composed of disgruntled former Atari employees. Imagic's shooters Demon Attack (1982) and Cosmic Ark (1982) are still considered classics by many Atari fans.
For every Imagic, however, there were companies like Ultravision, whose clunky one-on-one fighting game Karate (1983) and copycat shooter Condor Attack (1983) are rightfully forgotten.
Incidentally, Condor Attack was a clone of Demon Attack, which itself was inspired by yet another game -- Centuri's 1980 arcade game Phoenix. Atari officially converted that game in 1982 and tried litigation to force Imagic to take Demon Attack off the shelf. Atari lost yet again.
Third-party companies and their cartridges ensured the system's continued success, because no other video game console could boast of the same type of developer support or abundance of games. Competing systems such as Coleco's ColecoVision and Mattel's Intellivision II offered external expansion modules that allowed their system to play VCS cartridges, which became a part of their competitive marketing strategies.
Oddly, when Atari released the 5200, no such backward compatibility option was offered, confusing some consumers and hurting system sales. Atari tried making amends with a smaller 5200 system redesign and an awkward add-on module that enabled the backwards-compatibility gamers demanded. Unfortunately, this add-on was incompatible with the earlier, larger 5200 consoles without modification at a service center.
"We have learned no new secrets about the Atari VCS; we are using the same technical information that we have been using for the past four or five years. I think our success in getting the most out of the machine is attributable mainly to experience and hard work." – (Alan Miller, Senior Designer, Activision, Creative Computing Video & Arcade Games magazine, Fall 1983)
Coleco and Mattel joined the prominent ranks of other third-party developers for the VCS. Coleco mostly released poorly programmed, but high-profile versions of ColecoVision originals and arcade translations, such as Smurf: Rescue in Gargamel's Castle (1982), Donkey Kong (1982) and Zaxxon (1982).
Mattel, under the M Network brand, shined with titles such as the run-and-shoot Tron: Deadly Discs (1982, later available with a special themed joystick), the two-player-only Super Challenge Football (1982), the quirky jump-and-catch arcade game Frogs and Flies (1982), and the Bally Midway arcade racer conversion Bump 'N' Jump (1983).
Atari returned the favor with its Atarisoft brand of game releases for competing videogame and computer systems. The end result of all this sharing and cross-licensing was an unusual type of hardware and software quid pro quo that would be all but unimaginable today -- imagine, for instance, if Microsoft's Xbox 360 received a conversion of the Nintendo Wii's Super Mario Galaxy (2007).
Parker Brothers was a major supporter of early videogame and computer systems, specializing in multiple platform formats, but its primary home was the VCS. Licensed Star Wars games such as The Empire Strikes Back (1982), in which the player controlled a Snowspeeder in battles with Imperial Walkers, and paddle controller-based Jedi Arena (1983), in which one or two players re-enacted the light saber training scene from the original movie, complemented Parker Brothers' original titles and popular arcade translations such as Sega's Frogger (1982) and Nintendo's Popeye (1983).
In an unusual set of circumstances, Frogger was officially translated again by a different company, who had uncovered a licensing loophole involving differing media formats. This loophole would gain more notoriety with Tetris in the late 1980s.
Nevertheless, The Official Frogger (1983), on cassette from Starpath Corporation (formerly Arcadia Corporation) for use with its powerful add-on system enhancer, the SuperCharger (additional memory and multi-load games), was a superior translation of the arcade original.