The Intellivision was developed by Mattel's Mattel Electronics division, a subsidiary formed expressly for the development of electronic games. The console was test marketed in Fresno, California, in 1979 with a total of four games available, and went nationwide in 1980 with a price tag of $299 and a pack-in game: Las Vegas Blackjack. Though not the first system to challenge Atari (systems from Fairchild Semiconductor, Bally, and Magnavox were already on the market), it was the first to pose a serious threat to Atari's dominance. A series of ads featuring George Plimpton were produced which mercilessly attacked the Atari 2600's capabilities with side-by-side game comparisons.
Taking a page from the Atari play book, Mattel marketed their console to a number of retailers as a rebadged unit. These models include the Radio Shack Tandyvision, the GTE-Sylvania Intellivision, and the Sears Super Video Arcade. (The Sears model was a particular coup for Mattel, as Sears was already selling an Atari rebadge unit, and in doing so making a huge contribution to Atari's success.)
In that first year Mattel sold 175,000 Intellivision consoles, and grew its library to 19 games. At this point in time, all Intellivision games were developed by an outside firm. The company recognized that what had been seen as a secondary product line might be a big business. Realizing that potential profits are much greater with first party software, Mattel formed its own in-house software development group.
The original five members of that Intellivision team were manager Gabriel Baum, Don Daglow, Rick Levine, Mike Minkoff and John Sohl. Levine and Minkoff (a long-time Mattel Toys veteran) both came over from the hand-held Mattel games engineering team. To keep these programmers from being hired away by rival Atari, their identity and work location was kept a closely guarded secret. In public, the programmers were referred to collectively as the Blue Sky Rangers.
By 1982 sales were soaring. Over two million Intellivision consoles had been sold by the end of the year, earning Mattel a $100,000,000 profit. This was a big year for Mattel. Third party Atari developers Activision, Coleco, and Imagic began releasing games for the Intellivision. The most popular titles sold over a million units each. And Mattel introduced an innovative new peripheral, the Intellivoice. This was a voice synthesis device which produced speech when used with special games. The original 5-person Mattel game development team had grown to 110 people under now-Vice President Baum, while Daglow led Intellivision development and Minkoff -- a top engineer -- directed all work on all other platforms.
But many users were clamoring for the release of the "Keyboard Component", a computer upgrade heavily touted by Mattel as "coming soon". The unit featured a built-in cassette tape drive from which users would load its computer software; the cartridge slot on the Intellivision, which sat nestled in a cavity inside the Keyboard Component, continued to allow regular Intellivision games to be played in the usual way.
However the upgrade had proven to be expensive to develop and produce, so Mattel put it on the back burner. Mattel was investigated by the Federal Trade Commission (FTC) for failing to produce the promised upgrade, and eventually fined a whopping $10,000 a day until it was released. Finally Mattel offered the Keyboard Component for sale via mail order. 4,000 units were sold, many were later returned when Mattel recalled the unit in 1983.
The reason for the recall was that the unit was very expensive to produce and support, and that the then-innovative cassette tape unit never proved to be as reliable as consumer needs required it to be. Mattel by this time had set up competing internal engineering teams, each trying to either fix the Keyboard Component or replace it. The rival Mattel engineers had come up with a much less expensive keyboard alternative. The Entertainment Computer System (ECS), was much smaller, sleeker, and easier to produce than the original Keyboard Component. Unfortunately, while the original Keyboard Component had some advantages over the small computers of its day, the new Keyboard Component was underpowered and under-featured compared to emerging machines like the Commodore 64. The two keyboard units were incompatible, but owners of the older unit were offered a new ECS in exchange.
With the video game industry already staggering by the time the new Keyboard Component was planned, the machine was code-named LUCKI (for "Low User Cost Keyboard Interface.")
In addition to the launch of the ECS, 1983 also saw the introduction of a redesigned Intellivision II (featuring detachable controllers and sleeker case), the System Changer (plays Atari 2600 games on the Intellivision II), and a music keyboard add-on for the ECS. But amid the flurry of new hardware, there was trouble for the Intellivision. New game systems (ColecoVision , Atari 5200 , and Vectrex ) were stealing market share from Mattel, and the videogame crash began to put pressure on the entire industry. By August there were massive layoffs at Mattel, and the Intellivision II (which launched at $150 earlier that year) was slashed to $69. Mattel Electronics posted a $300 million loss. Early the next year, the division was closed - the first high profile victim of the crash.
But amazingly the system rose from the ruins when a group of employees purchased all rights to the Intellivision and its software from Mattel, as well as all remaining inventory. The new company, INTV Corp., continued to sell old stock via retail and mail order. When the old stock of Intellivision II consoles ran out, they introduced a new console dubbed INTV III. This unit was actually a cosmetic rebadge of the original Intellivision console. (This unit was later renamed the Super Pro System.) In addition to manufacturing new consoles, INTV Corp. also continued to develop new games, releasing a few new titles each year. Eventually the system died off, and INTV closed its doors in 1991.
The system rose from the ashes yet again when Keith Robinson, an early Intellivision programmer responsible for the game "TRON Solar Sailor" purchased the software rights and founded a new company, Intellivision Productions. As a result, games originally designed for the Intellivision are available on modern-day consoles including the PlayStation 2, Xbox and Nintendo GameCube, in the Intellivision Lives package.