There are a lot of reasons I felt SE fell off the bandwagon, it wasn't just one bad game, its really been a series of uninspiring titles and I felt overall, the company has become misguided by the direction of the franchise. I feel most of the talent has run away and what's left has largely been given too much leeway to mull over development hell pet projects or churn out quick sequels to games no one really gives a smurf about. I do agree abit that its also the industry, RPGs have fallen out of mainstream and have returned to niche markets that are supported solely by small devoted fanbases. There are Tales of Fans, there are Atelier Fans, there are Persona Fans, but I don't see much uniformity as RPG fans like you had back in the 90s. To me the Japanese industry is having a sort of revolt going on, with long time creators of the famous franchises jumping ship from their parent company and trying to go indie again.

I think, in order for Squenix to get back on top, they need to stop using their flagship series as a crutch, side games and spin-offs are fine but if you really look at the difference from the series before 2000 and after, the number of titles with FF in the main title has exploded (35 new titles between 01-13, not counting ports and remakes which would knock this number up to 72 entries as opposed to the 19 titles released between 87-00) and I feel many of these games were weak and have thus tarnished what the brand used to be.

The other real problem with SE is the lack of leadership. There is no one over there that seems to have a clear idea and goal for the franchise. Some have tried to assert a direction but the mixed reviews and fan backlash has SE now second guessing itself. I feel Kitase and Toriyama are a bit discouraged because their idea of making FF into a game that felt like a film did not go over so well with the fanbase. Nomura is too involved in his own projects to care about heading the main franchise (and I'm sure some of the backlash from his early career with the series has made him have second thoughts about taking the reins of the franchise) and people like Ito and Kawazu don't seem interested in taking over the franchise either.

I feel the company needs a strong creative leader to direct the franchise and I feel the company needs to change how they market the franchise and maybe do a rebranding. SE has pulled a Capcom and kind of ran their franchises into the ground in the last few years.