That's a fair point.
Also, thanks to the person who clarified ladder vs. non-ladder, since I have not played Diablo 2 and was not familiar with the setup there.
The setup is a bit more complicated than the division between ladder and non-ladder.
Closed battle.net contains both a ladder and a non-ladder component. All closed battle.net characters are stored on Blizzard's server and all characters on closed battle.net, ladder and non-ladder, are forced to play the official patch version of the game.
Ladder resets after an arbitrary period of time that Blizzard seems to pull out of their ass, but it's mostly somewhere between six months and a year. When it does, every character on ladder -- along with all of their items -- is sent to non-ladder, and everyone has to start over again. This prevents duping and item values from getting out of control, as well as limiting the amount of gear you can have at any given time. One ladder season refers to the period of time between resets.
Non-ladder characters are where all characters made before September 2003 and all characters from previous ladder seasons end up. Other than some restrictions on loot (some items can only be found or made in the ladder), this is basically identical to ladder except that the characters on non-ladder can be several years old.
Open battle.net is completely separate and does not have a ladder; instead, it encompasses all single-player characters, characters created for TCP/IP direct connect games, and characters created for open battle.net. Open battle.net doesn't force you to use the game's current patch version, so you can run whatever the hell you want so long as all of your clients are running the same thing.
And none of those games had the player footprints that games like WoW, LoL, etc. have today. Diablo 2 had actual solo player progression even in an online format which allowed players to sink more time into the game compared. Hell, I'd be surprised if any of those games had TORs player numbers.
Online gaming is just more crowded now, harder to keep a high number of active players then it used to be.
Only because there are more players in PC gaming than there were when Diablo 2 was released. There being less players in total does not make the arena any less competitive.