It hurt them because you didn't need to buy the errata to play the game and use all future supplements. That's what fully compatible means. I bought the 3.5 PHB and MM, but I didn't bother with the 3.5 DMG because I didn't need it to play or run the game. Truth be told, I didn't need the MM, either. I bought it for convenience in having the errata. The only book I needed was the PHB, and only because I was also a player in other games where people wanted to run all the errata as written.
The fracture you mention was more of a slight crack. 3e players still bought 3.5 products.