dudalb: FMV is interesting because in the mid 90's, when computers reached the point where they could handle FMV,many game companies thought it was the Next Big Thing and invested a lot of money into it; Sierra games even built a studio , where as most game companies just rented studio space. But they simply did not sell well, part of the reason was being the subject matter for FMV's was limiting and the need for changing CD;s created problems. It was pretty much dead by 2000;and even the replacement of CD's by DVD's ,which solved the changing CDs problem,did not revive it.
It's funny because Myst and Riven were such successes, and even some others like 7th Guest and Phantasmagoria sold very well if I recall correctly. Also others like Under a Killing Moon are now considered classics. I don't think the genre itself couldn't connect with consumers, but more that the games made after that maybe weren't compelling? Or the companies were mismanaged, which was and is still a huge problem with the gaming industry.
Adventure games themselves faded from popularity around the same time, and FMV isn't as useful for FPS and RPG games, which might also be a factor. As for why the adventure genre faded... well, we could brainstorm all day.