Interesting old thread.
I don't believe the hobby is dying out any more than it ever was in the past. Probably since about the mid-80s, I'd guess it has been more difficult to get the younger ones into this hobby for a number of reasons - $$, availability, and most importantly, far many more "interesting" things to do.
I remember going to Jean's Model Shop that was located in Houston's Sharpstown Mall (curiously was mentioned in the movie Apollo 13, the neighborhood not the model shop, as that was where the big Houston investors were attempting to lure the early astronauts to live even though it wasn't really that close to Clear Lake). It was always a treat to be allowed to go in there. My parents even bought something for me on occasion. When I was in middle school, there was a model shop in the old 40s-era downtown, which was easy to get to after school. A buddy and I would go in there nearly every day and just sit there and look at and talk about all the models. I don't recall ever actually buying anything - I mean, I was 13 and didn't have any money or had already spent what I did have on movie film or records.
I am 55 currently, have been building since I was 3 (Monogram's P-40B Flying Tiger that my parents got for me at a K-Mart and Dad undoubtedly helped me to build), but I did take time off in the early 80s through the mid-90s due to being more interested in things like my 8mm movie camera, baseball (was a high school player), girls, and then college. But curiously, I can't say that I was 100% model-free during those years. I remember building a pick-up truck, Monogram's original release of the 1/72 B-1B bomber, a few of the snap-together Star Wars models that came out after the release of Return of the Jedi, and then in college, after Top Gun, I built Revell's big 1/32 F-14. Right toward the end of my time at A&M, I took a speech class where I needed some props to talk about how Hollywood did visual effects, so I put together a Monogram A-18 and a Revell A-6 Intruder. In those years, model building was just something to do when I wasn't on a baseball diamond or didn't have a date (which was regrettable frequent).
I came back to the hobby in 1995 when I happened to be in a K-Mart (different location that where I got that P-40B), and happened across a big selection of models. I probably would not have gotten back into the hobby on the back of the Monogram P-40 or Spitfire that I found that day, but the Monogram He111 and Revell 1/32 Beaufighter sold me. I've been building consistently ever since.
I did try to get both of my kids into the hobby. My son built a P-51D and my daughter did a snap together Hobby Boss Typhoon, but that was as far as they went. I actually had more success with the oldest son of my neighbor, who was frequently found hanging out with me in my workshop, and I helped him build his F-14 and F-106 kits that his mom grabbed from the nearby Hobby Lobby.