Perhaps a better phrasing would be 'Why did the Scarred Lands line fail?'
I really don't know, though I saw a lessening of interest even as the Player's Guide class books came out, perhaps because of a perception that 'Scarred Lands was not a strong enough draw to sell those books, why else would they only preripherally mention the Scarred Lands?' (I am sort of quoting somebody here, and I think the original was somewhere on these boards.)
And interest in Termanna seemed weak. (Despite it being home of my favorite Scarred Lands bad guy, the Jack of Tears.) The only Termanna book to sell more than 2 copies was CC3.
Each of the last few releases seemed to sell less than the ones before, to the point where my FLGS stopped ordering them, I had to special order my last few purchases in the line. The Penumbral Pentagon I did not even bother with.
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That said, in truth I think that it comes down to White Wolf having spread themselves too thin over too many game and setting lines. And since they are focussing on their new World of Darkness setting, and the fact that D20 sales in general are slumping, now was a logical time for them to drop what they might well see as their least economically successful line. (Not unsuccessful, merely less successful than some of their other lines.)
The Auld Grump