Right. So let me elucidate.
Magic is at an unprecedented high at the moment. This is factual. What is equally factual is that this is not a permanent high. There will be a drop off moving forward, simply due to the natural ebb and flow of the game. This is baked into the design of Magic, with the conscious decision to increase and decrease power of sets, create small run, limited products and their decision to largely stay out of the retail space, instead handing the reigns of their product over to companies like StarCityGames.
Who said this was a permanent high? I agree that Magic, like all other things, is something that goes up and down depending on various factors and it may be that INN-RTR Standard will be the most popular format of all time for quite a while but even if it dipped down to pre-INN levels it would still be more popular than it was 10 years ago. You used the term "crash" and "fad" which is extremely disingenuous. The biggest barrier that Wizards has is getting new players into the game which is what the video game is for now. People can learn the rules of the game and play it with a computer opponent without the crutch of having an experienced player help them and at least when they go to their local game shop they have a general grasp of how to play.
Like any industry that counts on cyclical sales, they need to minimize the amount of players leaving the game, which is why there are eternal formats like Legacy and Modern. Legacy is directly tied into the reserve list. It's also the format most out of WotC control, due to their decision to keep the list and, again, stay out of the retail space directly. StarCityGames runs the legacy format. They've also garnered a huge interest in the format due to their streams - something WotC has done with their streams of modern, as well.
You're not taking into account that even when Standard rotation happens despite some players quitting there will be players who are either completely new or returning to the game. I will agree that Legacy is completely out of Wizards' control at this point because they are being held back by the Reserved List. At the same time if a sole entity can make the Legacy format more popular than it has ever been, you can hardly say that the format is dead or dying. This year SCG has had their most popular Legacy Open events ever.
Modern is Wizards solution to an Eternal format where they're not hindered by the Reserved List and can reprint things as they see fit. However nobody should be disillusioned about how they take Standard much more seriously than any other format since it's where they make their money. For the most part, Wizards really doesn't care that much about players who are quitting Standard or who are moving into Eternal formats since they have already gotten their money from them. To a degree they care since naturally any competitive player will care about keeping up with the latest and greatest cards if they are tourney-viable but they will not spend as much money on the game as a Standard player will.
The problem with legacy as a format is twofold - first the initial buy in cost continues to increase. This will 100 percent lead to the death of the format as a whole because there is a decreasing supply of product due to inability or unwillingness to reprint cards that are simply essential to playing the format. Second, it's the format that is least impacted by newer cards. The deck archetypes will see some variance when major bombs hit, but it's not as often as modern. For all intents and purposes, legacy is living on borrowed time. And yet, it's a supremely popular format. The desire to play with the greatest cards ever made is strong and is a common thread between all player archetypes. Simply ignoring that desire of players wanting to enter the format at less than the cost of a car doesn't help grow the game or the format. Obviously, WotC is actively trying to kill the format for that very reason. Hence the creation of modern. They understand players want to continue playing after their cards are no longer standard legal. But is modern the answer?
The cost of Legacy is indeed a barrier to entry. However aside from extremely fringe cards that see play in very specific decks (Tabernacle, Candelabra, Moat) the only format staples that cannot be reprinted are the dual lands. The only reason that the dual lands are as expensive as they are is because of the law of supply and demand. The demand for the dual lands exceed the supply and thus prices are naturally high. If the Legacy format were to ever truly die then you could expect to pick up dual lands on the cheap. Like I said earlier in the thread, Wizards can definitely help out by lowering the cost on the format staples like Force of Will, Tarmogoyf, the allied fetchlands, etc by reprinting them. Do you believe that they don't see the opportunity for a Legacy Masters equivalent? Because I expect it down the line as long as Modern Masters is well received. They are not trying to kill any format.
In short, maybe. It's still a very new format. They're learning as they go along. They're printing cards that clearly have modern in mind (Deathrite Shaman) they're slow to ban cards in the format and they're even attempting new products that are designed specifically for that format (Modern Masters). The problem, is that modern is designed to funnel newer players into an eternal format, but they are actively discouraging that natural progression. Modern Masters was created and is being sold as "not for new players." They're creating an artificial barrier to the format at a time when they should be loosening the reigns on it, letting this hoard of new and returning players into the format. Instead, they're basically being told that modern is not for them. Goyf is still going to be 75-100 bucks, even after the product that isn't for anybody is released, due to mythic rarity and artificially small print run.
Modern Masters is not for new players, it is for veteran players. They want new players playing Standard at Friday Night Magic. How fun do you think it's going to be for a new player to take a deck that is essentially an intro deck or event deck into a Modern tournament where they're going to either get combo'd out on turn four or swung for 20 by aggressive decks like Affinity? Their intent is to get a new player into Standard and playing that format and eventually ease them into the Modern format at the end of a cycle so they feel that they can still play with the cards in their collection.
Also, without knowing the print run of the format, you nor anybody else can accurately make a prediction on how expensive Goyf will be after the Modern Master reprint. It's certainly not going to crash to a 10-20 dollar card but I'm not so sure it will maintain a 100 dollar price tag.
So, the format that should be the place for newer players to go after these couple of blocks rotate out is not really a viable option for them, is being turned into Legacy Pt 2. The same issues that are killing legacy will kill modern, if it's not managed better than it is now. So, the natural dip of players will be much, much more severe once they have no real place to go once their decks are worthless and unplayable in modern. They have to do a better job planning for the future of the game and not allow the temporary spike in popularity to go to their head. They need to answer the question "how do we make modern available to these players" instead of continuously fighting the game's own popularity with things like MM. When I said they reserve list is killing the game, I more or less meant the eternal formats. The issue is that eternal formats are very much the backbone of the entire game. You need to allow players a place to go if a block underwhelms, a massively successful block rotates out and players need to still feel validated in their purchases of the same and give the game some variety. Draft and standard are the exciting, sleek cars on the road of MTG, but eternal formats are the asphalt. How they're mismanaging both with the reserve list in legacy and turning modern into legacy because of it is going to lead to major issues in the long run. It's not unfixable and I'm not simply doom and gloom. I love the game, I want it to continue to be successful - that success leads to things like DFC, streams on Twitch, more GP's, more FTV's, etc, etc. I'm worried because they don't seem to understand how to handle major success and if they don't handle it right, it could be disastrous.
tl;dr: Marketing stuff about stuff.
Again, I would like you to back up the claims that Magic, even just Legacy, is dying. I've already stated that SCG has broken their Legacy Open attendance numbers more than once in 2012. That doesn't seem like a dying format to me. The other weekend GP Philly broke previous records for the most attended tournament and that was with the imminent thread of Hurricane Sandy. Mother nature isn't preventing people from playing Magic, I don't see high prices of cards doing any better of a job. You also completely ignored the casual, non-competitive side of Magic that Wizards is now directly appealing, marketing and making product towards with Commander and to a lesser degree Planechase and Archenemy. There are probably more casual, kitchen table Magic players than there are competitive ones and previously they had nothing aimed at them. Commander alone is helping to boost Magic's popularity since it's a format that isn't so cutthroat competitive and is about having fun with goofy cards and encourages multiplayer. Wizards finally wizened up, made a product for them and got a taste of how much money they are willing to spend on a set aimed directly at them that they are making one every year, that is incredible and would have never happened before.
The death of Magic has been heralded and claimed by many people over the past two decades and they are greatly exaggerated.