The problem with mountain biking as a sport is that it failed to gain an audience outside of the riders and their friends and family. When the sport took off in the 80's there was a great buzz about it, and a lot of roadies switched over, and the sport was a blast. It certainly had a great atmosphere at the races. But everyone who went to the races was either a racer, a friend or related to one of the races--you never saw people there who just wanted to see a good race and had no relation to the sport. That never changed. And as the newness of the sport faded, all the advertisers left to find the newer things, and the money left. The main thing is that without a real audience, separate from the people involved in the event, there's no money in a sport.
Mountain biking was also hit hard by trail closures. In the late 80's a lot of the most popular trails in the Northeast were shut down. When the Sierra Club took an active stand against the sport, mountain bikers were helpless against well-organized activists. Many of my favorite rides in Massachusetts and New Hampshire were closed in a matter of weeks--and the same thing happened all over the country. Plus, it was hard to argue with the environmentalists who said that mountain bikes did substantial damage to the trails--they were right.
I think the snide remarks about cross here are off base, because whatever you want to say about the current trendiness of the sport, no one I've met has ever thought cross has any chance of taking off and becoming popular with the masses--unlike mountain biking, it's a niche sport that's completely happy being a niche sport--the niche might get larger for a while, but nobody I've ever met thinks cross will gain a larger audience. And for a while there, some people involved in Mountain Biking thought it could be up there with, say, rodeo. Didn't happen.