The sport may not be dead, but it's short of breath and has bad knees. It's sad to watch video of Nationals and see half empty seats. And it's no longer on national TV. Plus some rinks cut out freestyle entirely because they can make more money with hockey. (How they expect to get coaches to teach LTS when there's no freestyle, I have no idea).
You're not from the US, am I correct? So your country's experience may be different. This is predominantly a US board, so I'm talking about US experience.
No, I'm not from the US. In my country, skating is a (extremely) minority sport, so my exposure to skating has come from watching Worlds and similar competitions. I know that it has been years since the US has made it to the top of the ladies' podium. Some may argue that that was because of the loss of compulsory figures. I think that the de-emphasis on figures has resulted in lower quality skating skills in general, but then we have skaters like Patrick Chan and Kim Yu Na who did not do figures, but have excellent skating skills.
The truth is, I don't know why the US no longer dominates the field. Coaches like Frank Carroll and John Nicks are still there, and believe it or not, the US has one of the best training environments for figure skating in the world. For comparison, in Japan, rinks are PUBLIC from 10am-6pm everyday. If you're a top level skater and you're not in Nagoya (where they have the national training rink), hockey, speed skating and figure skating share the rest of the available time. There are also few rinks for the number of skaters. And yet, Japan is now producing many of the world's top skaters.
I think that it's just the natural flow of things. Singles used to be dominated by Russians, then North Americans, and now it looks like the next powerhouse is Japan. Give it another decade and it will probably be another country.