Released in 1982, the
Atari 5200 was cheaper (and graphically better!) than other systems by
companies such as Coleco and Mattel. Despite this, the console was a bit
of a flop.
biggest blunder was making the 5200 incompatible with the 2600. The
console couldn't play the huge amount of games available for it's
predecessor and gamers still wanted to play these games!
Then we had the dodgy analogue joystick - it was just lousy! Add the fact that the video games market was in decline (it crashed in 1983) and you can see why the Atari 5200 was so unsuccessful.
After the recent marketing disasters with the release of both the E.T. The Extra-Terrestrial and Pac-Man games on the 2600 (see the 80s Video Games page), this was yet another nail in the coffin for Atari.
Atari 5200 Video Game System
Photo by Daniel McConnell - http://www.flickr.com/people/trojandan/