Total bullshit, niche grand strategy games, flight simulators, difficult SHMUPS and challenging action games still sell relatively well. Dark Souls even made it into a blockbuster, and even Bayonetta manages to pull respectable sales figures. It's not about the difficulty; it's about the quality of your product - and its creativity.
There's literally no reason for me to replay Fallout 2.0 when I can just play the superior Fallout. Give me something new and creative.
These little 'hardcore' indie RPGs aren't selling well because they feel soulless, loveless. Which is amazing, considering how long so many of you worked on them. Maybe you just don't have what it takes.
It's not whether the games are hardcore. Plenty of hardcore games are mainstream hits, as you said. But it does have to do with what market you're targeting. It's also not about being stuck in the past. Baldur's Gate: Enhanced Edition sold 500,000 copies and all they had to play on was nostalgia because the changes they made sure as hell wasn't worth 500,000 sales at $20 a copy.
In Undertale's case, it comes from the same industry as classic JRPGs eg Earthbound and their modern RPG Maker derivatives eg To the Moon, and to a lesser degree indie games with JRPG art designs eg Bastion. The market for such games was there long before Toby Fox and despite talks of massive success, Undertale only has 770,000 owners on Steam, which is less than To the Moon at 950,000, a game that received the same sort of indie hype but nowhere close to the same amount of weeabo fanderp. I don't think anyone even on the Codex could argue that To the Moon was a symptom of the 4chan Flappy Birds generation, and yet it sold as well as Undertale. Undertale is in this respect not an exceptional game in any way.
In fact, all Undertale's media and word of mouth hype actually shows is that there is an active indie scene around "JRPG lites" that patronize such games as Undertake, To the Moon, Skybound, Lisa, etc. But this has long been the case. JRPGs were and are popular, and with the recent drought of quality JRPGs from Japan, their fans are looking towards indie games to fill the gap, so there is a hungry market. Even so, the above games are the cream of the crop; the average JRPG lite doesn't make it past 100,000 sales. Thus, it's a solid industry, but not a get rich fast strategy.
The problem with games such as our fellow Aterdux's Legends of Eisenwald, by contrast, is not that they are stuck in the past, but that the market they are targeting has never been large to begin with. I look at Eiswenwald and I can't think of who they're trying to draw in. It's a historical setting, but not historical enough for Total War and Mount & Blade fans. It's also fantasy, but not fantastic enough for D&D fans, and in any case it lacks the popular d20 ruleset. It boasts tactical turn-based combat, but it doesn't market itself as a strategy game, which is where most of the fans for tactical turn-based combat are. It's said to have solid writing, but even its positive reviews admit a lack of interesting characters & click-through story presentation, which is not what storyfags want to see in a story rich game.
So all in all, Eisenwald strikes me as a game that doesn't know who its audience is, and certainly doesn't know how to market itself, because even within the Codex, by nature sympathetic to such games, it's rarely talked about. It commits just about every cardinal sin there is when it comes to video game marketing, and tries to hit a market - European historical fantasy - that has never done that well outside of existing franchises in the past decade. In fact, our favorite Vince D. Weller's Age of Decadence has the exact same problem, which is why it and Eisenwald both sold like shit. It's though the elitist Codex fosters a concept of what a RPG ought to be that doesn't match what people actually want to pay for... Now why would that be, I wonder?
In any case, I'll be fair: I don't think the Codex ever called for historical fantasy lite European settings, which coincidentally is what both Age of Decadence and Legends of Eisenwald ultimately went for, to their mutual detriment. I don't know what it is with developers who style themselves hardcore Fallout fans setting their games in medieval/classical Europe. I suppose there is reason to believe, with Game of Thrones being all the rage, that there is a market for this out there. But I don't think Age of Decadence and Legends of Eisenwald are marketed correctly for that audience. After all, it's not the tactical medieval combat that's fueling the trend on TV - it's the story and the characters. And come to think of it, that's been the recipe for success for all new RPGs, including JRPG lites.