TC would be more of the expert here, but here are my observations merely as a consumer.
I liked "Muscle Media"... a LOT... and got caught up in the whole "Body-for-Life" phenomenon like many people did. (Who will admit it!)
I am the first to also admit that it really did a lot of good, in that it brought resistance training and contest dieting to a lot of people who either feared weights or had never thought about the importance of weights, cardio and proper nutrition in molding a beautiful physique.
Bill Phillips had also captured a niche market often overlooked in the "traditional" bodybuilding market; the stereotypical "Soccer Mom/ Working Mom/ Young Working Woman" market that is a HUGE demographic in the overall dieting and self-improvement market.
And herein lies the frustrating thing to me; Phillips and "Muscle Media" had begun to capture a HUGE part of this market. I couldn't go ANYWHERE; work, the grocery store or the Doctor; without talk of "Body-for-Life".
Then they seemed to blow it...
What do I think happened?
1) The Phenomenon was too "personality" and "contest" dependent
Phillips was a work-a-holic with a strong personality who was out promoting "Body-for-Life" and "Muscle Media" 24-7. He was EVERYWHERE... from TV to Internet Chats to book stores. When he stopped promoting, things began to die.
Also, a lot of the "momentum" was created by the lure of the contest itself (I think that there were two per year). This was a HUGE motivator for a lot of people and created almost an "instant" market for the magazine. It became almost a "Body-for-Life" monthly newsletter with a captive market. As the contest enthusiasm tended to die down as Phillips began to be less and less involved, so did the magazine.
2) They stopped catering to their niche and got lost
With the waning of the "Body-for-Life" phenomenon, the magazine tried to become everything from "Flex" to "Men's Health" to "Oxygen" to some hybrid of a lot of mags, while almost appearing to "abandon" that core demographic they had captured. In other words, they tried to be all things to everybody, when other mags were doing a much better job of it in their niche markets. The "Soccer Moms" couldn't relate, and the "Men's Health" readers had a MUCH better magazine in "Men's Health".
It was inevitable that the magazine was going to die because it had no core or niche market... and had "abandoned" the one it had.
The whole thing could have been a lesson in "Business/Marketing 101".
Anyway...these are just the opinions of an outsider...maybe TC can give us better insights.