[Tasselfoot]

This is why Guitar Hero and Rock Band were so popular during their peak... they combined elements outside of the niche. Popular music, actual instruments, and local (later online) multiplayer.

They started to falter in popularity due to lack in innovation (as bmah mentioned in #4) and also because of music labels hitting players with copyright notices when trying to share/spread their gameplay on youtube and elsewhere. You can't be a professional rhythm game player these days, because you can't monetize (most) of your content.