Coleco - founded as the Connecticut Leather Company - entered the video game market in 1976 with its Telstar Arcade. While initially successful, Telstar - which featured wired-in Pong-like games - couldn't compete with the cartridge-based Atari 2600 introduced the following year. Coleco lost tens of millions of dollars and only stayed afloat thanks to its successful handheld games.
In 1981, Coleco started making deals with arcade companies for the home rights to their hottest games. Part of Coleco's sales pitch was that they would release the games for three systems: Atari 2600, Intellivision and their still-on-the-drawing-board ColecoVision. More systems meant more potential sales with more royalties for the arcade companies. Coleco managed to secure popular titles that Atari and Mattel Electronics had been pursuing.
Their biggest coup was getting Ninteno's Donkey Kong, then the number one game in the arcades. The game became the cornerstone of Coleco's marketing strategy. When ColecoVision was released in Summer 1982, Donkey Kong was included with the console. It was also among the first titles Coelco released for Atari 2600and Intellivision a short time later.
In 1983, Mattel Electronics released Intellivision II, a cheaper console to replace the original Intellivision. The Intellivision II was supposed to play all of the Intellivision cartridges, but upon its release, users found that Coleco's Intellivision cartridges - Donkey Kong, Carnival, Mouse Trap and Venture - didn't work.
Mattel's spokespeople implied that this was proof that Intellivision owners should stick with genuine Mattel Electronics Intellivision cartridges - third party producers couldn't properly program for the intricate Intellivision system. In reality, Mattel had added code to the Intellivision II operating system - the EXEC - to purposely make the Coleco cartridges fail.
Coleco figured out how to get around this quickly enough, and subsequent releases had banners on their boxes proclaiming they worked on Intellivision and Intellivision II.
Coleco continued releasing Intellivision cartridges through 1983. Along with most other companies, they abandoned the video game industry altogether in 1984. Coming full circle, the last Intellivision title Coleco released was Donkey Kong Junior.
Coleco continued in business for a few more years, primarily marketing their Cabbage Patch Dolls. They finally went bankrupt and their assets were bought up by a number of other companies, including Mattel and Hasbro.