The CPU and the graphics and sound hardware are almost identical to that of the Atari 8-bit computers, although software is not directly compatible between the two systems. The 5200's controllers have an analog joystick and a numeric keypad along with start, pause, and reset buttons. The 360-degree non-centering joystick was touted as offering more control than the eight-way Atari CX40 joystick of the 2600, but was a focal point for criticism.

On May 21, 1984, during a press conference at which the Atari 7800 was introduced, company executives revealed that the 5200 had been discontinued after just two years on the market. Total sales of the 5200 were reportedly in excess of 1 million units, far short of its predecessor's sales of over 30 million.

Hardware

The 5200's large size is due in part to controller storage in the back of the unit.

The second revision of the 5200

Much of the technology in the Atari 8-bit family of home computer systems was originally developed as a second-generation games console intended to replace the 2600. However, as the system was reaching completion, the personal computer revolution was starting with the release of machines like the Commodore PET, TRS-80 and Apple II. These machines had less advanced hardware than the new Atari technology, but sold for much higher prices with associated higher profit margins. Atari's management decided to enter this market, and the technology was repackaged into the Atari 400 and 800. The chipset used in these machines was created with the mindset that the 2600 would likely be obsolete by the 1980 time frame.

Atari later decided to re-enter the games market with a design that closely matched their original 1978 specifications. In its prototype stage, the Atari 5200 was originally called the "Atari Video System X – Advanced Video Computer System", and was codenamed "Pam" after a female employee at Atari, Inc. It is also rumored that PAM actually stood for "Personal Arcade Machine", as the majority of games for the system ended up being arcade conversions. Actual working Atari Video System X machines, whose hardware is 100% identical to the Atari 5200 do exist, but are extremely rare.

The initial 1982 release of the system featured four controller ports, where nearly all other systems of the day had only one or two ports. The 5200 also featured a new style of controller with an analog joystick, numeric keypad, two fire buttons on each side of the controller and game function keys for Start, Pause, and Reset. The 5200 also featured the innovation of the first automatic TV switchbox, allowing it to automatically switch from regular TV viewing to the game system signal when the system was activated. Previous RF adapters required the user to slide a switch on the adapter by hand. The RF box was also where the power supply connected in a unique dual power/television signal setup similar to the RCA Studio II's. A single cable coming out of the 5200 plugged into the switch box and carried both electricity and the television signal.

The 1983 revision of the Atari 5200 has two controller ports instead of four, and a change back to the more conventional separate power supply and standard non-autoswitching RF switch. It also has changes in the cartridge port address lines to allow for the Atari 2600 adapter released that year. While the adapter was only made to work on the two-port version, modifications can be made to the four-port to make it line-compatible. In fact, towards the end of the four-port model's production run, there were a limited number of consoles produced which included these modifications. These consoles can be identified by an asterisk in their serial numbers.

At one point following the 5200's release, Atari planned a smaller, cost-reduced version of the Atari 5200, which removed the controller storage bin. Code-named the "Atari 5100" (a.k.a. "Atari 5200 Jr."), only a few fully working prototype 5100s were made before the project was canceled.

Controllers

The Atari 5200 controller included with the console

The Pro-Line Track Ball controller

The controller prototypes used in the electrical development lab employed a yoke-and-gimbal mechanism that came from an RC airplane controller kit. The design of the analog joystick, which used a weak rubber boot rather than springs to provide centering, proved to be ungainly and unreliable. They quickly became the Achilles' heel of the system due to the combination of an overly complex mechanical design and a very low-cost internal flex circuit system. Another major flaw of the controllers was that the design did not translate into a linear acceleration from the center through the arc of the stick travel. The controllers did, however, include a pause button, a unique feature at the time. Various third-party replacement joysticks were also released, including those made by Wico.

Atari Inc. released the Pro-Line Trak-Ball controller for the system, which was used primarily for gaming titles such as Centipede and Missile Command. A paddle controller and an updated self-centering version of the original controller were also in development, but never made it to market.

Games were shipped with plastic card overlays that snapped in over the keypad. The card would indicate which game functions, such as changing the view or vehicle speed, were assigned to each key.

The primary controller was ranked the 10th worst video game controller by IGN editor Craig Harris. An editor for Next Generation said that their non-centering joysticks "rendered many games nearly unplayable".

Internal differences from 8-bit computers

David H. Ahl in 1983 described the Atari 5200 as "a 400 computer in disguise". Its internal design is a tweaked version of the Atari 8-bit family using the ANTIC, POKEY, and GTIA coprocessors. Software designed for one does not run on the other, but source code can be mechanically converted unless it uses computer-specific features. Antic magazine reported in 1984 that "the similarities grossly outweigh the differences, so that a 5200 program can be developed and almost entirely debugged [on an Atari 8-bit computer] before testing on a 5200". John J. Anderson of Creative Computing alluded to the incompatibility being intentional, caused by Atari's console division removing 8-bit compatibility to not lose control to the rival computer division.

Besides the 5200's lack of a keyboard, the differences are:

The Atari computer 10 KB operating system is replaced with a simpler 2 KB version, of which 1 KB is the built-in character set.

Some hardware registers, such as those of the GTIA and POKEY chips, are at different memory locations.

The purpose of some registers is slightly different on the 5200.

The 5200's analog joysticks appear as pairs of paddles to the hardware, which requires different input handling from the digital joystick input on the Atari computers

In 1987, Atari Corporation released the XE Game System console, which is a repackaged 65XE (from 1985) with a detachable keyboard that can run home computer titles directly, unlike the 5200. Anderson wrote in 1984 that Atari could have released a console compatible with computer software in 1981.