It's not like they can only grant licenses a limited number of times. I seriously doubt that by allowing us this, they would water down the global demand for He-Man products.
It's not that Mattel is worried about the brand. It's not that they have any concerns about misrepresentation. It only comes down to one thing...
Money (or a lack thereof in this case)
For many years, I worked in NY for a trade magazine who focused specifically on the licensing world. I have had many dealings with Mattel, and understand this business quite well. For a licensing machine like Mattel, $5000 or $10000 for a limited license, falls far beyond "peanuts" status. It is simply not worth their effort.
Additionally, Mattel has been working on a kick start to this brand for a while (with a rumored movie, cartoon series and toy line all on the drawing board). With this, has come a huge push to license the brand, and its' stock has certainly gone way up as of the past few years.
Just this past January, THQ signed an exclusive
, multi-year license to produce He-Man video games. Now, this (I am fairly certain) doesn't include classic or retro games, but it would be easily arguable by THQ (who is paying far greater licensing fees and royalties) that a release of this game could in some way backfire and hurt the He-Man video game license, causing a negative impact on sales. This would not bode well for Mattel. It would just be easier to avoid.
IMHO, this limited-release license would have been much easier to attain 5 to 10 years ago, when the brand was all but dead to anyone but vintage toy collectors and nostalgia plagued 30 somethings. Now, with marketing dollars invested by Mattel, and a huge push to re-boot the brand, I would guess that this would be, at very least, a daunting task...if not impossible.