Have the third-party d20 publishers failed?
I guess that would have to be on a case-by-case basis, but in the aggregate I'd have to say "No" by pretty much any standard.
Most (note, no statistic!

) new players start with D&D. Why? Because it is widely available and a brand name. You can pick up D&D at most major book chains nowadays, not simply at hobby stores.
Lack of 3rd Party Setting Adventures has little to do with the matter as very few beginning gamers, by comparison, are drawn to 3rd Party settings and are then driven away by lack of adventures for same. Why? Because, again by comparison, most nacent gamers are not drawn to them in the first place. It sort of like getting IHOP or the local Pancake Joint -- the local joint may be better, but IHOP is a known quantity, at least by name, and therefore many people will stick to it just
because it is a known quantity.
When I started playing D&D there were no adventures -- I made everything up, and thus got in the habit (of course this is pretty much a "We Had To Walk 30 Miles To School Uphill In Both Directions During Snowstorms" story, so it is not terribly relavent).
I know several individuals, both neophyte and experienced gamers, who have had terrible experiences over the years with published adventures -- the adventures made assumptions about character habits/actions, they railroaded the party, the adventure did not fit into a give base campaign, etc. Therefore I know a goodly number of folks who are very nervous about buying and using adventures. However, as will be quickly noted, this is in no wise a scientific survey so can be dismissed.
On the other hand I have never
once heard, or heard of, a new gamer getting turned off to gaming because there were no supplements for Setting X. Not one. Again, not scientific, but I have been gaming for nearly 30 years, so I think that is at least vaguely relevant.
OTOH 3rd Party D20 companies have really pushed the boundaries of what D20 can be. Look at Conan, Midnight, AU, Mutants & Masterminds, and Grim Tales -- you would hardly think these were all based on the same game, but each has a loyal following. Part of the reason they are succesful is
because they can ride the D20 coattails, but part of the reason that D20 is succesful is because of the wide range of variants that a single basic system can provide as a kernel for such variety.
In many ways, I think WotC owes a debt of gratitude to all the 3rd Party companies out there that have dared to push the D20 envelope, thus forcing WotC to keep on its toes!
