Then Magic took off; and by the late 90s (at least here; the UK might have been different) RPGs in general had faded very sharply and D&D was pretty much on life support; sure WotC bought out TSR in '97 and thus saved the IP from extinction, but in comparison with even ten years prior virtually nobody was actually playing it.
I mean, I can only speak anecdotally, but I think AD&D's loss was mostly White Wolf's gain. Like, when I got to university in 1997, not only had the RPG club grown to the point where it was meeting in a larger space (so I was told, obviously I was new), but there was, IIRC 1 table of AD&D players, vs. 6+ tables of White Wolf players (I think 3 of which were Vampire). There were more
Ars Magica players than D&D players! That's obviously 18-22-year-old players, not the whole market, but I thought it was interesting.
So D&D on life support? Definitely. Other RPGs? I can only say that's not what I saw. Well hmmm - generic medieval fantasy RPGs were suffering pretty badly (D&D, Rolemaster, etc.), like, they were "uncool" - but anything that wasn't that, particularly Urban Fantasy/Horror stuff was doing pretty good. Then 3E and Exalted both helped make fantasy RPGs cool again, and pretty much saved that genre between them (people forget how big a deal Exalted was at the time, I think).