I think a big part of why Telltale failed is because a lot of indie/smaller companies can do what they do on a smaller budget, more creatively. They thought if they just kept improving their graphics engine it would bring in the AAA players' bucks, but it won't, when nothing actually new is being breathed into their stuff. Plus, yeah, those types of games are pretty damn niche to begin with. You look at a game like Life is Strange and it kind of followed what Telltale games have done, but better, with choices in game /actually/ making a difference in the end outcome. Telltale games just want you to think your choices matter.
That's my take on it, anyway. Maybe it's also because I just replayed Shenmue I and II and feel like, although (still) clunky as hell, it did certain aspects of those kinds of games better, almost 20 years ago. Thank you, QTEs.