Yup.
Another failing that didn't help was the DDI ' buy everything twice model'.
If you bought a crunch book the stuff that modified characters went into the DDI and you paid for it again. If you just subscribed to DDI then you got all the bits to work with the CB but you still needed the book for the actual rules governing the character bits.
This is why you find copies of the AD&D Core Rules Expansion going for $200 or more. This model set a pace, that DDi should have taken an example from, as well as the e-Tools. Ok people say they sucked, all I had to use to play with was the ones that never got finished that came in the Dragon Magazine.
This is something people had to use when and where they wanted. They own it, and can put it on whatever machine they need it.
DDi brings us to another failing, understanding digital technology. People want to own things. While I stated previously that people don't want to rent it, your point touches more about buying it twice. People DID happily buy the books twice for the AD&D Core Rules, I have the first version, 2.0 and 2.0 expansion, and own all the books in it save for DM Options. Not everyone though does want to buy it twice. If DDi had been modeled after Core Rules, then it would likely be a bigger hit. They could sell expansions to update with all the Dragon/Dungeon content and those who wanted it could get it updated while online..who knows.
The point being people do NOT want some online character builder that gives you nothing unless you are online. So aside from the payments, rental with DDi, or buying books twice...the other factor is usability.
People want something for their money this day and age. I had to buy the computer, pay for the electricity, and the old CB let me use it when I wanted too even if my ISP goes down I could still play. They sacrificed usability for compatibility to make the new version cross-platform compatible, but failed to see what cost it would bring. Sure they gained Apple users and made some existing ones happier, but how long until a server crash causes people to want pro-rated charges for lack of service due to WotC error?
You could download and use the CB until this new model, you can download the DDM army maker thing, the Dungeon Tiles Mapper, and lots of other things. They shoudl have made something like that that doesn't require internet connection to use and make it a BONUS rather than the product for DDi.
Making the former magazines freebies to subscribers is backwards, and they should have taken the notice of the 30 years prior of people wanting something to help them with characters with all the programs written in Dragon Magazines in the Electric Eye section I think it was called, and everything since. Hindsight is 20/20, but DDi was designed with blinders on so they failed to learn from the past.
Heck to go with entry level product to get people interested in the game, levels 1~3 should exist still in a downloadable version of the CB, with ALL content for levels 1~3. That would even make a "Red Box" look more appealing to people that could expand beyond the books and try other things that appear in the larger version of the game to make them want to see what is after level 3.
Maybe I am getting off-topic so will figure where to put a thread about what entry level or introductory product should have existed when 4th came out, and what a good one to play for a future edition would be, because anything done now is too late in the game to be making entry level products in my mind.
