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Part of the Commodore 64's success was its sale in regular retail stores instead of only electronics or computer hobbyist specialty stores. Commodore produced many of its parts in-house to control costs, including custom integrated circuit chips from MOS Technology. In the United States, it has been compared to the Ford Model T automobile for its role in bringing a new technology to middle-class households via creative and affordable mass-production.[14] Approximately 10,000 commercial software titles have been made for the Commodore 64, including development tools, office productivity applications, and video games.[15] C64 emulators allow anyone with a modern computer, or a compatible video game console, to run these programs today. The C64 is also credited with popularizing the computer demoscene and is still used today by some computer hobbyists.[16] In 2011, 17 years after it was taken off the market, research showed that brand recognition for the model was still at 87%.[5]

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The product was code named the VIC-40 as the successor to the popular VIC-20. The team that constructed it consisted of Yash Terakura,[18] Shiraz Shivji,[19] Bob Russell, Bob Yannes, and David A. Ziembicki. The design, prototypes, and some sample software were finished in time for the show, after the team had worked tirelessly over both Thanksgiving and Christmas weekends. The machine used the same case, same-sized motherboard, and same Commodore BASIC 2.0 in ROM as the VIC-20. BASIC also served as the user interface shell and was available immediately on startup at the READY prompt. When the product was to be presented, the VIC-40 product was renamed C64. The C64 made an impressive debut at the January 1982 Consumer Electronics Show, as recalled by Production Engineer David A. Ziembicki: "All we saw at our booth were Atari people with their mouths dropping open, saying, 'How can you do that for $595?'"[6][20] The answer was vertical integration; due to Commodore's ownership of MOS Technology's semiconductor fabrication facilities, each C64 had an estimated production cost of US$135.[6]

In the United States, the greatest competitors were the Atari 8-bit 400, the Atari 800, and the Apple II. The Atari 400 and 800 had been designed to accommodate previously-stringent FCC emissions requirements and so were expensive to manufacture. Though similar in specifications, the C64 and Apple II represented differing design philosophies; as an open architecture system, upgrade capability for the Apple II was granted by internal expansion slots, whereas the C64's comparatively closed architecture had only a single external ROM cartridge port for bus expansion. However, the Apple II used its expansion slots for interfacing to common peripherals like disk drives, printers, and modems; the C64 had a variety of ports integrated into its motherboard which were used for these purposes, usually leaving the cartridge port free. Commodore's was not a completely closed system, however; the company had published detailed specifications for most of their models since the Commodore PET and VIC-20 days, and the C64 was no exception. C64 sales were nonetheless relatively slow due to a lack of software, reliability issues with early production models, particularly high failure rates of the PLA chip, which used a new production process, and a shortage of 1541 disk drives, which also suffered rather severe reliability issues. During 1983, however, a trickle of software turned into a flood and sales began rapidly climbing, especially with price cuts from $595 to just $300 (equivalent to $1600 to $800 in 2021).

Although many early C64 games were inferior Atari 8-bit ports, by late 1983 the growing installed base caused developers to create new software with better graphics and sound.[34] It was the only non-discontinued, widely available home computer by then, with more than 500,000 sold during the Christmas season;[35] because of production problems in Atari's supply chain, by the start of 1984 "the Commodore 64 largely has [the low-end] market to itself right now", The Washington Post reported.[36]

With sales booming and the early reliability issues with the hardware addressed, software for the C64 began to grow in size and ambition during 1984. This growth shifted to the primary focus of most US game developers. The two holdouts were Sierra, who largely skipped over the C64 in favor of Apple and PC compatible machines, and Broderbund, who were heavily invested in educational software and developed primarily around the Apple II. In the North American market, the disk format had become nearly universal while cassette and cartridge-based software all but disappeared. So most US-developed games by this point grew large enough to require multi-loading.

At a mid-1984 conference of game developers and experts at Origins Game Fair, Dan Bunten, Sid Meier, and a representative of Avalon Hill said that they were developing games for the C64 first as the most promising market.[37] By 1985, games were an estimated 60 to 70% of Commodore 64 software.[38] Computer Gaming World stated in January 1985 that companies such as Epyx that survived the video game crash did so because they "jumped on the Commodore bandwagon early".[39] Over 35% of SSI's 1986 sales were for the C64, ten points higher than for the Apple II. The C64 was even more important for other companies,[40] which often found that more than half the sales for a title ported to six platforms came from the C64 version.[41] That year, Computer Gaming World published a survey of ten game publishers that found that they planned to release forty-three Commodore 64 games that year, compared to nineteen for Atari and forty-eight for Apple II,[42] and Alan Miller stated that Accolade developed first for the C64 because "it will sell the most on that system".[43]

SSI exited the Commodore 64 market in 1991, after most competitors.[58] Ultima VI, released in 1991, was the last major C64 game release from a North American developer, and The Simpsons, published by Ultra Games, was the last arcade conversion. The latter was a somewhat uncommon example of a US-developed arcade port as after the early years of the C64, most arcade conversions were produced by UK developers and converted to NTSC and disk format for the US market, American developers instead focusing on more computer-centered game genres such as RPGs and simulations. In the European market, disk software was rarer and cassettes were the most common distribution method; this led to a higher prevalence of arcade titles and smaller, lower-budget games that could fit entirely in the computer's memory without requiring multiloads. European programmers also tended to exploit advanced features of the C64's hardware more than their US counterparts.[citation needed]

1983 saw Commodore attempt to compete with the Apple II's hold on the US education market with the Educator 64,[63] essentially a C64 and "greenscale" monochrome monitor in a PET case. Schools preferred the all-in-one metal construction of the PET over the standard C64's separate components, which could be easily damaged, vandalized, or stolen.[64] Schools did not prefer the Educator 64 to the wide range of software and hardware options the Apple IIe was able to offer, and it was produced in limited quantities.[65]

The C64's designers intended the computer to have a new, wedge-shaped case within a year of release, but the change did not occur.[6] In 1986, Commodore released the 64C computer, which is functionally identical to the original. The exterior design was remodeled in the sleeker style of the Commodore 128.[48] The 64C uses new versions of the SID, VIC-II, and I/O chips being deployed. Models with the C64E board had the graphic symbols printed on the top of the keys, instead of the normal location on the front. The sound chip (SID) was changed to use the MOS 8580 chip, with the core voltage reduced from 12V to 9V. The most significant changes include different behavior in the filters and in the volume control, which result in some music/sound effects sounding differently than intended, and in digitally-sampled audio being almost inaudible, respectively (though both of these can mostly be corrected-for in software). The 64 KB RAM memory went from eight chips to two chips. BASIC and the KERNAL went from two separate chips into one 16 KB ROM chip. The PLA chip and some TTL chips were integrated into a DIL 64-pin chip. The "252535-01" PLA integrated the color RAM as well into the same chip. The smaller physical space made it impossible to put in some internal expansions like a floppy-speeder.[73] In the United States, the 64C was often bundled with the third-party GEOS graphical user interface (GUI)-based operating system, as well as the software needed to access Quantum Link. The 1541 drive received a matching face-lift, resulting in the 1541C. Later, a smaller, sleeker 1541-II model was introduced, along with the 800 KB[74] 3.5-inch microfloppy 1581.

In 1990, the C64 was repackaged in the form of a game console, called the C64 Games System (C64GS), with most external connectivity removed.[75] A simple modification to the 64C's motherboard was made to allow cartridges to be inserted from above. A modified ROM replaced the BASIC interpreter with a boot screen to inform the user to insert a cartridge. Designed to compete with the Nintendo Entertainment System and the Sega Master System, it suffered from very low sales compared to its rivals. It was another commercial failure for Commodore, and it was never released outside Europe. The Commodore game system lacked a keyboard, so any software that required a keyboard could not be used.

In 1982, the C64's graphics and sound capabilities were rivaled only by the Atari 8-bit family and appeared exceptional when compared with the widely publicized Atari VCS and Apple II. The C64 is often credited with starting the computer subculture known as the demoscene (see Commodore 64 demos). It is still being actively used in the demoscene,[76] especially for music (its SID sound chip even being used in special sound cards for PCs, and the Elektron SidStation synthesizer). Even though other computers quickly caught up with it, the C64 remained a strong competitor to the later video game consoles Nintendo Entertainment System (NES) and Sega Master System, thanks in part to its by-then established software base, especially outside North America, where it comprehensively outsold the NES.[citation needed] 2ff7e9595c