Classic and Modern Sonic can coexist, and fans have been asking for such a setup for years. Unfortunately it took nearly 15 years to finally get SEGA to go for it. Sonic 4 was, I felt, SEGA's lame attempt at such a split but company politics and nonsense marketing mindsets meant that we had Modern Sonic going both a 2D (Sonic 4) and 3D (Colors) route. Similarly to Mario who is, essentially, Modern Mario but exists in the New Super Mario Bros. 2D games and the 3D games ( Galaxy, 3D Land, 3D World).
I really feel that Classic Sonic was long stuck behind some bullshit rule that SEGA and Sonic Team had for the brand, in that Classic Sonic wasn't allowed to appear in the Archie Comics or in his own games. They would only allow stuff like classic designs being obscured (check out the Archie Sonic comics that show Eggman in the past, obscured by shadow, and the Genesis arc in which we kinda got the classic designs (Eggman anyway) but Sonic still had the green eyes. And then, of course, there was Sonic 4. I feel that Iizuka and/or some higher ups did not want classic and modern out there in fear of ruining the brand somehow. Maybe they thought it could confuse the general public or too much classic could take away from modern?
Anyway, I feel that since Generations things have been changing. Classic Sonic was a major reason people loved Generations, and since then we saw the demise of Sonic 4, the rise of the Taxman ports and Sonic Mania as well as Archie finally being allowed to release Classic Sonic comics and show the classic designs. Merch has also returned featuring Classic Sonic, and it is not because it is tying into a game featuring him like the 20th anniversary Jazwares stuff was doing.
I'm not sure Sonic Boom helped, but perhaps the fact that SEGA of America deemed it okay to have a third Sonic out there meant that Classic Sonic wasn't that big an issue in the minds of Sonic Team and SEGA higher ups in diluting the brand.
Personally, I have bought more new Sonic merch in 2015/2016 than I have in a long time due to all the Classic Sonic stuff available.