1986-1987: Sega Master System, Atari 7800, Atari 2600 Jr.
Over the next two years, with the NES dominating the market, Sega and Atari slugged it out for second place.
1986: Sega Master System
Sega began distributing the $200 Sega Master System in the United States only a few months after the NES had become widely available. But Nintendo had a trump card: Its strict game developer contracts prohibited developers from releasing any NES game on any other console for two years. Because the NES had become the dominant console, a developer had to choose between maximizing its game's sales and gambling on the success of a new console. This contributed to the limited game offerings Sega could muster. Nevertheless, the Master System was cheaper than the NES and became popular in Great Britain, Brazil, and Australia.
Years later, in 1990, Sega released its Master System II. This sleeker, cut-back version initially featured the built-in game Alex Kidd in Miracle World.
1986: Atari 7800 Pro System
Shortly before the scheduled release of the Atari 7800 in 1984, Warner Communications sold Atari to Commodore computers founder, Jack Tramiel. He immediately shifted Atari's focus to personal computers, and only when Nintendo's NES breathed new life into the console category did Tramiel decide to launch the 7800 (at a price of $140 each). By then, however, Nintendo had captured the hearts and minds of gamers, and its severe restrictions on software developers meant that the already-geriatric 7800 received little third-party game support.
1986: Atari 2600 Jr.
Maybe this was when Atari jumped the shark. Around 1986, Atari repackaged its classic Atari 2600 console in a series of Atari 2600 Jr. revisions. The idea was simple: Make it cheap ($50) and keep Atari's balance sheet in the black. "The Fun is Back!...it's the 2600 from A-tar-i!"