I don't think the hobby is dying, but it is changing and I think modelling is a hobby that is picked up at a later age these days rather than being a childhood hobby.
There is a lot more competition from other forms of entertainment these days and a lot of it is electronic which is a lot more appealing to the younger ones. They offer hours of entertainment, no chemicals, no drying time hence no wait, no mess and therefore no cleanup. Most of all, you can actually play with them rather than just imagining them doing what they're supposed to do and making the odd engine noise. In terms of gratification, they just offer much quicker gratification than model building does.
However I think as a person gets older, then model building becomes more appealing, not because of the desire to build models, but because we are drawn in by the subject matter which matches our interests. I'm pretty sure that most car modellers are, surprise surprise, car lovers. Likewise for plane and armour modellers. However you're not always able to have access to those interests because some of them just aren't things you see every day. That's where books, and internet searches come in, and before you know it, "I want to build a replica of that tank I'm going to drive over my boss one day!" Or that plane you're going to zoom through the skies. Or that Ferrari that you'll buy...... In another four life times.
I'm sure we've also noticed that the cost of models are rising and the average kid just can't buy a model with their pocket money anymore, nor do models have the commercial appeal of other cheap plastic toys that they see in action on the tv.
I think we are seeing the evolution of the hobby, from something we did as a child when all you used was some glue and some paints that you brushed on without a care in the world about a full cockpit or fully detailed wheel wells or any of the other multitude of tiny minute details that simply has to be there these days, otherwise it will be unacceptable. This is evidenced in the kits that are being released nowadays.
I think that we've hit a point where we realised that the inevitable has actually happened to us, and while we've grown, we weren't expecting our childhood hobby to grow into us. Or it could just be a case of we just don't want to admit what we've become, which is dare I say it......... Middle aged, and still want to believe that we still do things that young people do these days.
By the way, I'm turning 36 this year. Been modelling since I was a kid because I was a military buff but chose not to go into the military for my career so this hobby is my outlet. I'm hoping what I said is true because if I'm wrong and the hobby does die then I'll have to look for something else to do in my spare time. Once I've gotten through the stash...........