The death of Smooth Jazz (similar to BM/EZ) was the inability to define the genre. And worse, even within the genre, within each station, people couldn't understand the pulse of the audience and what they craved to hear. Ultimately, the genre died on radio because it never connected to an audience well enough to support itself.
Yeah, aging demos, right--heard it before. However, the people I knew that listened to Smooth Jazz were in their 20s-30s in the 80's-90's. Nowadays they are in their 50s. When the format raged on radio, it was generally for prime consumers. I never met older people that craved it.
Smooth Jazz was a kind of answer to the fading EZ/BM format. It wasn't an adequate format though! They tried to piece multiple formats together and slap on the name "jazz" to add sophistication within the minds of the listeners. Most stations began by playing adult contemporary with a leaning towards the Chuck Mangione/Grover Washington-type stuff (fusion, cross-over, etc). As the format aged (the moment it began), there was a plethora of formula and a dearth of originality. The appeal of fusion became a regression in semi-experimental jazz; more notes and less melody became "cool" and cooled the format. Add to that a problem of invasive annoyance as the saxophones pierced the ears in an endless parade of whining instruments jarring people from enjoyment of the music. It became a tiresome format which could be heard for 30 minutes or an hour, but it wasn't something a general audience would want to hear for hours. It shook off listeners as quickly as it dragged them in.
I think the other failing of smooth jazz was that it wanted to be the young, hip replacement for BM/EZ, but it narrowed scope so far while BM/EZ had a broad and enticing (near limitless) range of instruments, sounds, rhythms, melodies, and cross-genre music. BM/EZ could absorb and regurgitate almost anything with strong rhythm and melody. Smooth Jazz became an identical string of instruments played by a small group of accepted musicians. It has a lightly processed electric guitar, or an acoustic guitar, a sax, sometimes a flute if lucky, a drum kit, a synth/organ more often than piano, a bass... and rarely something additional to spice it up. They took BM/EZ and got rid of all those lush instruments and exotic touches. They took the AC format and got rid of most of the variety. And people wonder why it died?