Oblivion made the mistake of being successful. It made the grave mistake of being more successful than its predecessor despite doing some things worse.
Yes, it did some things worse... and as a result, it fucked over the genre for years to come. Its influence is a touch of pestilence upon the entirety of PC gaming, not just RPGs.
Let's take a look at the things Oblivion either pioneered or popularized:
- instant fast travel to any discovered location with no investment of either gold or mana, but also no risk of random encounters... basically free instant teleport
- quest markers and map markers that appear on your compass so you never have to ask "How do I find Caius Cosades??" Later games would go even further and place markers IN THE MIDDLE OF YOUR SCREEN rather than just in the compass; by now those have become absolute standard and barely any first person games come without them anymore
- Oblivion was the first game to feature mini-DLCs like horse armor, which has now become industry standard and even some indie games charge you extra for small content like that; this is the most perfect example of pure decline because for Morrowind, Bethesda released
several mini-mods for free
- full voice acting for every NPC, each line spoken by an NPC at any point is voiced, leading to a much tighter word budget for the writers so NPCs will have fewer non-essential things to say unlike Morrowind where you could ask them anything if you wanted to
And this doesn't even mention the removal of my favorite Morrowind features (spellmaking, lots of equipment slots of mix-and-match armor dressup, levitation, etc), these are just the things Oblivion popularized in gaming to the detriment of pretty much every game made after it.