It seems to me that WotC often sees the right trends but applies them in the wrong ways. Consider 4e. It benefits from innovations inside and outside conventional RPGs and looks tailor made for electronic portability and aims to be familiar to the WoW set. Unfortunately, this always raises the question: "Why don't I just play WoW?" We all know the answers to this, but the rules never do much in the way of supporting D&D's special features.
On the other hand, the company is portioning out the game in 1970s style: three big books and no materials, or a boxed set that presents a limited game that you basically have to abandon wholesale to continue with the hobby. The three book thing pretty much *only* appeals to grognards at this point. The box set teaches the game but also feels like either a ripoff or like a boardgame where instead of "advancing" to the full rules you can just run it again.
Everyone knows how successful box-series D&D was, even *despite* the fact that it was created almost entirely to support a legal fiction. In this model, expansions never invalidate previous books. They also add complexity in layers and provide specific campaign directions. And the WoW generation is *used* to this kind of thing. They purchase expansions too. Card and minis players are used to this concept. And older gamers know it well. We know it's commercially viable for RPGs because it's worked for D&D before and even outside D&D, we've seen success with this model via White Wolf's Scion (which basically uses Mentzer's D&D as a model to portion out power levels and adventure focus across three books).
So the three-book core is dumb. D&D should be a basic set plus linear expansions. I definitely don't think D&D is failing but I think the innovation that's obviously at work isn't taking it to a broadly relevant place for consumers.