TSR went under because of management, had nothing to do with product.
Fun fact: around the time the Blumes departed TSR, they had roughly 90 relatives on TSR's payroll.
Oh, it did, it did. It had everything to do with product, in the 1990s, at least. (By that time, the Blume relatives were long gone.)
While TSR had decent success with its alt settings - they badly screwed up on their generic AD&D offerings. Since their offices were filled with wannabe failed novellists, most of them didn't want to write "vanilla" adventures, and when they were tasked to, they didn't have the right knowledge. The resulting adventures, many of them written by RPGA alumni (Jean and Jeff Rabe, and Douglas Niles, all talentless hacks), were dreadful garbage.
Swamplight,
Terrible Trouble at Tragidore,
The Murky Deep, and their ilk are unimaginative, boring "cabinet contents" dungeons without the truly interesting encounter design and charismatic locales of the 1e era. I suspect they lost a lot of gamers because of that. I
knew this stuff sucked when I was in my early teens. There were better modules in the late 1990s, but that's mostly after TSR's downfall and in the early Wizards of the Coast era. The early-to-mid 1990s were horrid.
WRT the settings, Dark Sun, Ravenloft, and Planescape at least sold decently, and each had a small fan base - where they erred is that they started coming out with ultra-niche supplements like
The Complete Sha'ir's Handbook, which were only bought by a small share of the niche. That's where they failed - these product lines started out promising, and were important in retaining slightly jaded gamers. It helps that they were written by people who were much more enthusiastic about their assignments than the new recruits in the Intern Pit who were told to crank out so many words in a certain amount of time. And who allegedly
weren't allowed to playtest on company time.
You can add to this failed entries into collective card games, the over-extension of the originally successful novel lines (sounds familiar?), shit like
Dragonstrike!, and I suppose yeah, Lorraine really did funnel a lot of money into her own voluminous folds.