Hellforge posits that 2008 was the worst year on record for MMOs. But the "collapse" had nothing to do with the genre's viability, and everything to do with hubris and poor decisions by game-makers.
The wreckage includes three titles whose names are either punchlines by now or dangerously close: Hellgate: London, Age of Conan, and the dumpstered Tabula Rasa, joined by the patched-too-late Pirates of the Burning Sea, as examples of how not to run an MMO railroad.
Hellgate cratered thanks to bad management, bad decisions and their reversals, and its bastard sibling Tabula Rasa was so awful Lord British decided to leave Earth rather than deal with the mess. Pirates of the Burning Sea patched its problems, but way too late to save itself. Age of Conan, as discussed before, stopped trying after you got past level 20. Bottom line, Hellgate and Tabula Rasa's servers are shutting down entirely (or already have) and the other two have merged or closed many of theirs too.
The lessons? Listen to beta testers; get the launch right, because patches won't save your asses, and if you're innovating some new gameplay mechanic, do it like you mean it. A successful MMO depends on a huge investment of a gamer's time. The investment on the development/publishing end should be total, too.
The MMO Crash of 2008 [Hellforge]