Because Commodore lost the plot. :(
While it appeared that they languished on their success they were developing some remarkable new systems to replace it with - I had the technical details of some parts and they really were very clever, efficient and way ahead of their time. Unfortunately they struggled with the hardware development including one point where, according to hearsay (I lost my contacts within Amiga HW dev at this time) they had to reverse engineer their own chipsets as they'd "lost" the designs; I still don't understand this or know the truth behind it. One of the more interesting developments that they were apparently attempting was hardware windowing support where each window could have it's own colour palette, colour depth and (possibly, was never sure on this) even DPI resolution. This was an evolutionary change from the multiple screen system where each screen could have its own resolution and could be split vertically (horizontal bands of differing display modes), simultaneously splitting the screens horizontally as well and effectively creating hardware windows would have tasked the chip designers somewhat but the efficiency and performance could have been amazing had they pulled it off.
As a result of Commodore's failure to capitalise on their success they let the (initially) technically inferior PCs overtake them in the market and with the opening up of the PC market by OEMs and the subsequent reduction in costs Amiga's fate was effectively sealed.