They do need a new edition. 4E failed because a lot of D&D players don't like the mechanics and fluff, and some are just ticked off at the company, itself. I don't know if they can do much about gamers actively disliking the company, but to win back the people that don't like the game, they have to make a game that is distinctly not 4E. Making a basic 4E will not win back any customers, it will only waste money and show just how clueless they are about their customers. Besides, they basically tried that with Essentials. It was poorly received and failed to revive the brand. A new edition may not save the brand, but it is the only option they have right now.
I disagree.
The general world they created as the "world of D&D" in 4th edition works. It is a good setting, with its own sense of mythology. It at last actually feels mythic, instead of a pastiche. And achieving that was one of the many things that they did absolutely correctly, in my opinion.
I spent the last week rereading my D&D 4th edition books. And honestly? It's a decent game. It does what it sets out to do in a pretty simplified manner. I'm pretty impressed with it overall.
However, the mistakes I feel the company made were in presentation. Which actually can be corrected and the game saved. It will just take a little effort on the company's part. And a lot less resources than it would take to launch a completely new, and unnecessary edition.
Presenting a basic introduction to the game, as a basic set. Simple and totally playable, in and of itself, would provide a good entry point into the 4th edition experience. (And don't get me started on the basic set they released...)
The Essentials line. Oh what a mess of confusion that caused!
Calling anything "Essential" is an automatic point of confusion. It points the arrow firmly at those products as being absolutely necessary to play the game. When they just weren't. WOTC needs to scrub that word out of its vocabulary entirely and rename those books for what they truly are. A pocket rules compendium, and a few minor other things. They are NOT essential!
Remove the focus on miniatures. As I said above. A basic game would have sample maps and counters. And honestly? It's not that expensive to produce maps and counter sets. It's something low cost that those new to the game would really appreciate.
Putting the game back under the OGL and putting out a real SRD will spur that third party support that the company wanted in the first place. So that situation is fixable.
4th edition can simply be revised, reformatted, and relaunched. So that is not really a big problem.
The hard thing that WotC needs to do is this: Apologize to the gaming community at large. Show real effort with the products that the company will truly make good. And stop being so rediculously money-grubbing!
That is what will save D&D. Not a 5th edition. A 5th edition simply shows that they have rolled over and completely given up. That they learned nothing. That they will totally repeat their folly again. And that they just consider the gaming community drones simply to be be sold to.