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IMO (since I was there near the end), “Sierra” didn’t really die, it just got folded into a larger entity and dissolved slowly. But, if you are referring to the classic period of Sierra, it died because games had moved beyond adventure games long before Sierra stopped trying to make them. We responded to the superficial technical changes (3D), but tried to bend the adventure genre to the 3D environment rather than bend our game designs to the new possibilities the tech provided. By the time we were trying to ship KQ8, Larry 7, QFG5, etc, the market had largely moved on to Doom and Quake, Warcraft and Diablo. Heck, I was working on the Babylon 5 project while we watched space shooters die all around us. The last great thing Sierra had in its hands was the Lord of the Rings MMO. We practically invented the MMO with The Realm and had Sierra really gotten behind that project 100% (it was massively understaffed), it could have kept the Sierra label afloat.
Sierra (Oakhurst in particular) was really good at making 2D adventure games and unfortunately, while the rest of the industry was getting serious about developing other genres and technologies, we relied on our old tools and old ideas about what games could be.