SOE did the NGE because LucasArts TOLD them to. LucasArts looked with longing at WoW and its MILLIONS of subscribers and at SWG's typical MMO 6-digit numbers (at the time) and decided it wasn't good enough.
It was dying because LucasArts kept SOE on a very short leash in terms of what they could and could not do with the IP. SOE should have approached LucasArts seeking rights to produce a game set AFTER ROTJ, as an alternative Expanden Universe. Instead, they chose to seek the rights for the classic trilogy era, smack dab in the middle of Lucas's directive not to write any third-party material. So they got the rights to the classic trilogy, but were not allowed to do anything with it.
Dan Reubenfield was correct. SWG WAS bleeding subscribers. But he exaggerates the rate. I remember pre-CU. Almost every official city was packed with players. I was always seeing lots of people in the wilds. At its height, SWG had at best around 500k subs. If they were losing as many as he claims, at the rate he claims, then there would have been a much more noticeable drop in active players... Where the noticeable drop DID occur was when the Combat Upgrade went into effect. They lost a massive number of people overnight. Of course, for many who left, it was a knee-jerk reaction and many were returning, only to be slapped in the face by the NGE six months later, which totally reinvented the game into exactly what it was originally meant to get away from.
Does anyone remember how when the NGE launched, the forums erupted in rage. We're not talking about the usual malcontents in a forum who gripe about every little thing just to gripe. We're talking about droves of people who had never posted before, who had been content to just play the game. It was so bad that SOE actually put the forums on subscription-based blackout. If you weren't paying, you couldn't even READ the forums. They knew they had messed up big time. But rather than owning up to it, they buried their heads in the sand, systematically banning those who spoke out against the NGE. If you have to resort to gestapo tactics like that, you've really screwed up.
SWG was always designed as a niche game. It was never going to have WoW's numbers... Heck even WoW wasn't expected to have numbers like that. The industry has yet to get it through its thick collective skull: WoW's numbers were a FLUKE. They were the exception to the rule... Even to this day, NO MMO has managed to come anywhere close. Some may hit maybe 1 or 2 million, but they also are the exception to the general rule. Had LucasArts let SOE off the leash and taken a hands-off approach, then SWG would have thrived because it would not have been redesigned into something that it originally was not. And had SOE simply done what the community was asking, from the beginning, namely fixing bugs and adding content, the hemorrhaging would have been a lot less.
They were sitting on a goldmine. But LucasArts wouldn't turn SOE loose, and SOE never seemed to care what the community at large though about where the game should go. The only one who had any sense of design direction was Raph Koster. He got promoted out of development and was put in charge of the California wing of SOE. Whatever grand plan there was for SWG, Koster took it with him, and nobody had the courage to step up and even try to GUESS.
When I look back at SWG, I recall a game that had so much potential that it is inconceivable that between Lucas Arts and SOE, they could not capitalize on it. It is pathetic.