Being a follower of LucasArts since it was a division of LucasFilm in the early 80's (Rescue on Fractalus, Koronis Rift, etc), through the hey-day of adventuring (Maniac Mansion, Zak McKracken, Day of the Tentacle, Full Throttle, Sam & Max, Loom, The Dig, Grim Fandango, The Monkey Island series, and more - their resume consists ONLY of hits in the genre!)... even though I worked at Sierra in the late 90's, I always felt that the Lucas adventure games were the best. They combined wit, good stories, thought-provoking situations, and puzzles tough enough to enjoy but not frustrating or deadly (like Sierra's).
Then what happened? Lucas announced he was going to make the Star Wars prequels. It seems natural that they would gear LucasArts towards Star Wars games... But EXCLUSIVELY? Yet they did so. Thus followed a million-and-one clones of already-made games with a Star Wars veneer slathered over them.
To me its no wonder the new Adventure titles were cancelled or weren't coming together: The SW Prequels have been in the works for something like 6 years now. Game designers are impatient, creative people. I can't imagine the quality minds that came up with the adventure-game stories & designs sticking around through the SW drudgery (at least not without becoming zombies)... So I'm *SURE* LucasArts has experienced its share of "brain-drain" over the last several years. I don't know where the quality designers have scattered to, but I doubt the creative teams responsible for past success are still there.
And on the subject of "no market for adventure games" - that's just Bullsh!t. Sure, you're not going to have a multi-million-copy seller (oh, wait - what about Myst???)... But you can certainly have successful (in a business-sense) adventure-games.
The reason we don't see adventure games selling well these days, is because no one is making them - but that in and of itself is NOT a valid argument for why they can't be made and sold in a decent fashion. We've just gotten into a "chicken or egg" situation in the industry over this genre. I remember when LucasArts / LucasFilm was a creative powerhouse and would take risks and try new things... They were the sort of company that would push THROUGH the "chicken or egg" situation, make a quality product, and see how it did at-market. Nowadays, with the competition, consolidation, big-budgets, etc... NO ONE wants to take any more risks than they absolutely have to.
Which is sad, because many of our biggest blockbusters in history came from risky concepts. I sincerely hope that small developers fill this void; although having worked in the industry, I don't know how plausible that is - I certainly know how challenging it is!
--Noel "HB" Wade