I'm no expert, but I would venture to say that Smooth Jazz is failing because it's gotten so bland. In an attempt to "be all things to all people," they've made all the artists all sound alike. As a result, they've alienated a lot of the their fans (like me) and failed to make enough new ones. People who aren't fans of jazz probably never will be. So why water down the genre in the "hopes" of getting their support?
Some water is good, I guess. If it wasn't for contemporary jazz (the kind jazz critics hate), I would've never been turned on to the genre. Traditional jazz (the kind jazz critics love) is too dull to me. But it's gone too far in the last 10 years. But if they go back to a more melodic approach, instead of the current groove-oriented one, they might get their fans back.
It seems like the same thing happens anytime a group tries to attract more people. TWC is a great example. In an attempt to get more fans, they've dumbed down the forecasts and added watered-down programming. They've also added more rock/rock-influenced music to the local forecast. I assume this has worked, but one has to wonder how many fans they've lost by trying to appeal to everyone.
While I understand why classic rock gets more listeners, I'm personally sick of all the classic rock and 80s/mix type stations. Enough already! Try something new for crying out loud!