The Magnavox Odyssey 300 console was released in October of 1976 for the low price of $69. The Odyssey 300 was designed to compete with the Coleco Telstar. It uses a dedicated graphics/logic chip, the AY-3-8500, the same chip that Telstar also used for its console. This made the Odyssey 300 part of the first line of consoles that used a single Integrated Circuit rather than transistor-transistor logic. ather than multiple computer chips or transistor–transistor logic.

The Odyssey 300 has the same three games as its predecessor, the Odyssey 200. However due to the use of the AY-3-8500 the gameplay is closer to the Pong games from Atari than the games of the previous Odyssey series. The games have no horizontal control, the ball angle was automated and the game control consisted of a single dial, instead of three like in the older consoles. The Odyssey 300 also introduced three difficulty levels: Novice, Intermediate and Expert. And lastly, also due to the dedicated chip, the console was able to print the score directly on the screen, eliminating the need for players to keep their own score using pen and paper.

The AY-3-8500 "Ball & Paddle" integrated circuit was the first in a series of ICs from General Instrument designed for the consumer video game market.

In 1975 General Instruments developed the AY-3-8500 chip that would revolutionize home gaming. Initially there was no interest in the chip, General Instruments could not find interested buyers. At the same time Coleco had the desire to built a home console. Thanks to Ralph Baer, the brain behind the Magnavox Odyssey, Coleco and GI found each other and in 1976 Coleco Telstar was put on the market. It immediately became serious competition for the Magnavox Odyssey.

Ultimately the AY-3-8500 was used in more than 200 consoles, from the APF TV Fun, the Philips Tele-Spiel Las Vegas, the Sears Hockey Tennis game to the Tandy TV-Scoreboard and many, many more.

The AY-3-8500 was designed to output video to an RF modulator, which would then display the game on a domestic television set. The AY-3-8500 contained six built in games:

1. Tennis/Pong
2. Soccer/Hockey
3. Squash
4. Practice game
5. Shooting 1
6. Shooting 2

The AY-3-8500 was the 625-line PAL version and the AY-3-8500-1 was the 525-line NTSC version. It was introduced in 1976 with Coleco the first manufacturer to implement the chip in its Telstar console. Only a few external components were needed to build a complete system, which made this chip an attractive option to produce cheap pong machines.

The AY-3-8500 was the first iteration of the chip with black-and-white video output. It was possible to colorize the game by using an additional chip, such as the AY-3-8515.