I suspect that the Musicland bankruptcy had something to do with it also.
They were also trying to survive by appealing to a niche market (classics), but the niche market wasn't enough to sustain them imo. I think that they are the new casualties of the
current flood of anime and the increased cost of licensing new titles also. Since they didn't have many popular new releases, their presence in brick and mortar video stores was limited dealing them the ultimate death blow imo.