I'll disagree with you on the "franchise titles." The most obvious being Donkey Kong for the Colecovision. Zaxxon was also an important win for Coleco. However, I maintain that Zaxxon (arcade and home version) was less about game play and more about being a graphical showcase.
You could argue about what the franchise title for the 2600 was. Early on, Space Invaders was a huge release - that would be my pick. I believe had it not been for Space Invaders, we wouldn't even have this discussion.
Which brings this question - how was Nintendo able to control the titles being released for their system? Recall that Atari had tried to block Activision from releasing titles for the 2600 but lost that court case thus making way for CommaVid and Froggo to release their crap titles.
Fair enough on disagreeing, but as I said, those same showcase titles were also on other systems (or near identical clone games). Once the NES made it to town, they didn't put Super Mario or Link on the Sega or Atari systems, hence forcing you to BUY the NES/SNES systems if you wanted to play those games. I realize there were Coleco specific games, and Atari specific games, but no exclusive 'blockbusters' I can think of. Space Invaders was indeed a sales driving title for Atari, but it was also a few years prior to ColecoVision, and Intellivision had Space Armada, a VERY similar game. So I don't think would be accurate to say in 1982 Space Invaders was driving sales of 2600's. More likely would have been Pac Man-- and that could have sold MANY more consoles if it hadn't been such a crap version.
And to answer your second topic, Nintendo had the proprietary lockout chip, a type of BIOS routine I think (http://en.wikipedia.org/wiki/10NES). As such, it was intellectual property (IP), and couldn't be legally reverse engineered is my understanding (See the Tengen entry on the previous link). Atari on the other hand, didn't have a bios, and as such was reverse-engineerable. Hence Coleco's ability to make the Atari Module with 'off the shelf parts' (even the Coleco version of Atari- Exp Mod #1 and Gemini- had custom chips, they supposedly 'could' have been made with Radio Shack parts, just not as cost effectively) and not violate IP of Atari. (Challeneged in a $500 Mil lawsuit by Atari apparently that Coleco won) This could be wrong, it's just how I understand it to be from lots of readings.
Not sure how accurate it is, but found this on an Atari History page:
"Atari settled a lawsuit from Activision, and allowed the development of third party video games in return for royalties. Dozens of companies began making games for the Atari VCS." (http://www.heartbone...phist/Atari.htm)
I couldn't find any direct references to the Atari v Activison court case in a quick google search. Anyone got more info available on the case and the verdict? I can't quite grasp Atari settling if they didn't think they were backed up against the wall. But greed can also make a company do strange things.