I think the “Core 7”/“Mane 6” was the original beginning of the end for MLP, and most of the issues that came after stemmed from that.  MLP was about variety and always something new to buy.  As a kid, I never wanted doubles. I always wanted to see something new. G1, G2, and the prime G3 years were all about new ponies constantly coming out.  Having access to repeated characters does give kids a chance to get their favorites if they missed them originally, but having nothing but the same group of characters over and over makes everything stale. And no parent is going to cough up for a 10th Pinkie Pie at current market prices.  The first few years of G4 was a decent balance of Mane 6 and new ponies, but they managed to screw it up in later years by putting out nothing but the Mane 6. Churning out G5 on the heels of G4 led to the new toys sharing shelf space with the unsold crap that was sitting on shelves for over a year, killing the new stuff before it had a chance to even get rolling.

Hasbro went for cheap and lazy(endless boring iterations of the same characters) and catering to the fad group(all the stuff marketed to bronies).  Mattel knows how to make a great toy for kids, and how to cater to collectors at the same time. I often envy Mattel collectors. They get respect from Mattel. MLP only got noticed once the bronies took over, and even then Hasbro wasn’t great.