The game had a lot going for it a launch, especially after several months after they had reduced the number of horrendous bugs that were in the launch version. It’s not that Anet’s strategy was doomed from the beginning. It’s that their strategy failed from poor planning or implementation, in this case both.
Arenanet seemed to want to do a lot with the Living Story, but it’s still hardly picking up steam even after limping along so many times in the past. Either through poor writing or poor execution, LS has just failed to interest people with the exception of particular patches which were particularly interesting or (more often than not) had in-game rewards or mechanics which were worth playing while they were there. Even now, the revamped questing UI and the story achievement system have done more for Living Story than the actual STORY.
Living Story wasn’t inherently doomed. It just didn’t live up to the goals at some part of the process, and the whole story suffered as a result since it never really recovered from its shortfalls.
This recent patch is different. Rather than failing to branch out into a new area that Anet’s been dreaming of, they are changing the existing game that we are already playing into one that many players including myself find less fun. This is why you see so much backlash. If something like Living Story, Super Adventure Box, or some similar project fails: it only really affects that project and players who were interested in that content. Other players only complain because that time and resources could have been spent on something else. But when you go and change the entire leveling system and it fails and it’s a buggy unbalanced mess, that affects everyone who is not exclusively playing level 80 content. It’s not one of those “Oh I don’t like to fix sign posts, this patch sucks” kind of problems. It is a larger and more pressing issue that affects more players in more ways. It doesn’t help that a lot of these changes are unpopular in the first place….