During the Atari 7800’s life cycle, Atari found themselves struggling to get developers to create 7800 versions of then-popular arcade titles because of a controversial policy employed by Nintendo. When Nintendo revived the industry, they signed up software development companies to create NES games under a strict license agreement which imposed serious restrictions on what they were allowed to do. One of the key clauses was that companies who made Nintendo games were not allowed to make that game on a competing system for a period of two years. Because of the market success of the NES, companies chose to develop for it first and were thus barred from developing the same games on competing systems for two years. The software libraries of the Atari 7800 and Sega Master System suffered tremendously as a result.
Some NES titles were developed by companies who had licensed their title from a different arcade manufacturer. While the creator of the NES version would be restricted from making a competitive version of an NES game, the original arcade copyright holder was not precluded from licensing out rights for a home version of an arcade game to multiple systems. Through this loophole, Atari 7800 conversions of Mario Bros., Double Dragon, Commando, Rampage, Xenophobe, Ikari Warriors and Kung Fu Master were licensed and developed.
Third party development for the 7800 was limited as most game companies were locked into exclusive agreements with Nintendo for the NES. 11 titles were developed and sold by three third-party companies under their own labels for the 7800 (Absolute Entertainment, Activision, and Froggo) with the rest published by Atari themselves. However, most Atari development was contracted out.