People were not ready for it. Maybe they still aren't but things are better now thanks to new sandbox games like Stalker, Oblivion and Fallout 3. Morrowind was just not recognized for its genre at that time.
In Morrowind when you are released, you are free. Many players didn't know what was happening. They didn't realize they can go their ways as they like it. Do they have a clue about the game world size? Do they know about the story? There is a chance they though the game has no storyline. Well, it is a sandbox game but it has a many stories and they are more complex than any other FPS game out there. Just one opinion you can get from a random NPC has more story than %90 of games out there.
It is impossible to hate Morrowind, it has something for every taste. You go try to join Telvanni, they will tell their world view and let's say you hate it. This doesn't mean you can hate the game too. Because there are other factions who likely think entirely different from Telvanni's. You still can bring your morals and views while joining one group. You control the pace, you try to solve the world around you. You can't say it is slow paced, it is you playing it slow then. Some other player might have finished the main quest in the time I finished the dwemer puzzle box quest! It wouldn't surprise me a bit.
It is always how you understand it not what developers intended. This is not like those types of games. This also doesn't mean "all left to player's imagination", no. Morrowind provides more than any other game in its richly detailed world. But it is still left open for player's imagination. You are not forced to listen someone else's morals and act accordingly like it is yours or you agree with it. You can do whatever you want. This also doesn't mean "there are no consequences", no. Consequences are there but they happen in real time without scripts manipulating where you can only sit through those consequences and suffer. It doesn't lock you to two dialog options unnecessarily every two steps. When you do something with big consequences you can easily accept it because it is you who brought it to yourself, you aren't tricked to choose a dialog branch written by some
clever writer.
I really didn't realize what was Morrowind actually bringing to the table until I read "The name of the rose". It is called "open text", Morrowind was trying to get it to next level in an interactive world. I wonder how many people realized this connection. This is the future of interactive medium. Not moral maschism.
Also first person lets you see its world from your character's eyes for its depressing and ugly beauty. I love it personally.
And also it suffered from serious bugs. It was a system hog. Long pauses traveling the world. Without patches,
you got stuck everywhere and you have to open console and type fixme. You have to learn this information but from where?
All types of other collision problems.
Low cpu cycles of that time was making AI go stupid. Everyone in Balmora liked to swim.
CTDs. CTDs. CTDs. (Although I never crashed to desktop, mine was just slow).
Also,
And abomination of faces. I mean animations were OK for that time. Faces were just awful. Good thing I learned about mods at the right time. Thank you World of Faces, my first mod.
Fog distance could be better. I know the view distance could be doubled in original engine. So there could be better transitions.
Combat needed more work. I'm not against probability and skill based system, not at all, but mudcrabs can't dodge [censored].
Mods and patches work great though. I still never stumbled a CTD, except my MGE beta testing sessions. It is a great time to play Morrowind. It is one of the best looking games right now and content is just enormous. Community seems to be bored a little though this year or maybe it is something about this time of the year?
Many things like that scared the players. Oblivion was mostly hype. It was gorgeous. It was grand. Everyone had this urge to check it out. The presentation was perfect. It doesn't last until level 10 though. You can even get your fix in 10 hours and done with it.(What would it be without modders?) But it really reached that scared audience of last time. Fallout had its fan base already. So with that they reached even more people. Now everyone on internets will ask "Hey, is it like Oblivion/Fallout 3?" on a new game. I think Bethesda did their job very well on advertising the genre. The crowd is more educated now. Still I would like to see games in the spirit of TES. I am stuck with Bethesda and their engine and bugs. Yes I am complaining because no competition is no good.
Where are my open world FPS/RPG hybrid games?
Now think about this, let's say Tes 3 was called TES 3 Forever and wasn't released until this time. And in 2011, TES 3 as a combination of Morrowind and Oblivion plus their mods and a good amount of professional polishing/improvement over them was released. (It would probably come with 10 DVDs or 1 blu-ray.) TES III would be the best [censored] game ever. Meh, I think about it, it still is.