While the Magnavox Odyssey console could play multiple games, the software was embedded on chips in the console; the cartridges would simply modify the circuitry inside the console with jumpers. The configuration of the jumpers would define which game you played. This meant that no software changes could occur on the device but hardware changes only. If a new game was created you'd have to buy a new device to attach to your television.
A new breed of console had been conceived and was starting to arrive, one that would allow new circuitry to be added easily and allow new games to be played without the need to buy a new machine. The trick was to have microprocessors inside the video-game cartridge. When the cartridge was plugged in to the device, it became part of the console, running whatever program was stored in Read Only Memory (ROM) on the cartridge.
While the system for running games had improved, video-game production itself was still very basic with most development being carried out by one person. They would create the concept, write the code, draw the graphics, and make the sound, much like one-man developer teams.
In 1979, four developers from Atari realized that the games they had created for meager pay were earning Atari around $60,000,000 a year. They decided to leave and set up their own company. Activision , the first third-party developer was founded.
After the success of Space Invaders, video games started to become mainstream. Arcade machines entered shopping malls, restaurants, and convenience stores bringing about an explosion in video-game usage. Space Invaders sold over 360,000 arcade machines worldwide and generated over $2,000,000,000 in quarters. From 1978 to 1981, the sales of arcade machines went from $50,000,000 to $900,000,000.
By 1982, video games generated more revenue than both pop music and Hollywood films combined.
It was around this time that a debt-ridden toy company named Nintendo turned around its fortunes, by firstly, securing the rights to distribute the Magnavox Odyssey console in Japan and secondly, creating their own games for arcades and on the Atari 2600 machine, Intellivision, and ColecoVision video-game systems. In 1985, Nintendo released Nintendo Entertainment System (NES) and the system was a huge success.