I think River West Brands understands everything. They want to sell/license a million cheap units with the Coleco name on it to a million people who also don't care much about Coleco. They need to establish ownership of the brand which might be a little iffy right now. To do that they need to do what they are doing. If they alienate a few hundred (or more) fans it does not matter to them.
Edit: The only thing they might not understand is where/how they are going to get Colecovision content/games?
Actual Colecovision compatibility is a technical liability if your goal is to make and sell microgames to a mass market.
The cheapest hardware worth mass producing in 2017 is somewhere between PS2 and PS3 in terms of capability,
and it is far, far easier to pump out Coleco-era-looking games that target this actual hardware,
because there is no need to fit everything into Colecovision's extreme technical limitations:
no scrolling background
32 16x16 pixel sprites with 1 color each, only 4 per scanline
16 total colors
2 colors per 8x1 background pixels
Z80 ASM is the only programming language
There is no mass market business value in producing Colecovision games in 2017, because the cost of dealing with the above limitations vastly exceeds whatever profit could be recouped.
So anyone who wants to make big money from the Coleco name these days, wouldn't be interested in Colecovision games per se.
They'd be more interested in a fantasy platform like pico-8 that provided the same nostalgia feel, but which didn't have expensive technical limitations.
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