Euthymia
I remember guitars being pronounced dead in the '80's when synths were all the rage. Haircut 100 and A Flock of Seagulls had supposedly laid them to rest.
 
And of course, there's the famous story about the record company executive who passed on The Beatles because he thought guitar bands were passe.
 
So I'm inclined to roll my eyes each time guitar music or rock music or whatever is pronounced dead, and kick back and wait for the next Beatles or Ramones or Sex Pistols or Nirvana or Green Day or Oasis or whoever are the next ones who are going to pick up axes and connect with disaffected youth. And yes, I know that my list ends decades ago, but I'm 57, okay? The newer guitar bands I like aren't aimed at disaffected youth. Wooden Shjips and Mugstar aren't teen sensations.
 
As long as we produce pissed-off young people, electric guitars and the music played with them are unlikely to become entirely obsolete.

They are not obsolete, the problem is too many of them have been produced over all these decades...and unless they were abused they still work.  (Recently was part of a sale of an Acoustic made in 1939 that sounded amazing)
 
Lots of people playing guitar, but it is the Guitar Center problem...giant store and only so many guitars are needed for the population.  It is a flooded market in the USA.  
 
I own guitars I haven't played in almost 10 years becuase I have too many of them.  
 
Certainly new guitars still need to be made, the issue is there are a number of makers in the field all vying for a few dollars.  It is a rough business to make the profit investors expect to have a return on their money.  

This thread made me look into the Harmony Monterey acoustic I have from my Dad. It *seems* to be a H1327 (later model due to the musical note on the headstock, c. 1945). I had popped the back off in 2014 to truss the back of the body and realized I do not remember if I ever wrote anything about it down... the new truss blocks the back and I forget what was printed inside of it now. His thumb wore through the paint on the back of the neck, which is a rather cool for its heirloom value.

Brian Walton
They are not obsolete, the problem is too many of them have been produced over all these decades...and unless they were abused they still work.

You have an excellent point there. They don't wear out like automobiles and small appliances. The growth market is probably in lessons and setups/repairs (it really is, that's how smaller stores are staying in business; my friend opened a store in Portland, OR 2 years ago and is doing great with used gear and repairs).
 
But don't people still want to buy brand new guitars?
 
Do mom and dad want to buy Jason or Bethany a used Stratocaster on Craig's List or do they want a shiny new one?
 
Does William Blueslawyer, Esq. want to buy a $7000.00 Les Paul sunburst on eBay or does he want to go to a store and be treated like royalty and take home a brand new one?
 
I don't know, I only ever buy used, except for one time, when I bought my Martin D1 20 years ago. Guitar Center was running a fantastic sale.
 
Some people do only want new stuff. I don't know why. Cooties?

Still have the first guitar I ever bought - a Harmony Sovereign:  $107.00 in 1970.  Had to buy it when I went away to college cuz my sister wouldn't let me take her guitar that she never used.  Still sounds warm and wonderful with great lows.  The intonation is pretty bad, but I use it for slide and open tunings and it works out.  I think John Sebastian used to play one right around that time.  Go Bandlab.

Ok, so today I discovered that Bandlab owns Heritage Guitars Inc.....yes, my absolute favorite electric guitar company.  The one that made the only guitar I've ever played that feels like it was made for me (a Heritage Prospect), and I've had the good fortune to play a lot of very nice instruments modern and vintage.  

Interesting read...
 
https://www.mlive.com/new...ritage_guitar_sou.html

jgarland
Interesting read...
 
https://www.mlive.com/new...ritage_guitar_sou.html

I also noticed they discountied my favorite model.  
 
Story you posted also reinforces my statements above about how tough the Gutiar Making business is.
 
I've played a lot of guitars including "holy grails" of 50s Gibsons, and what Heritage was doing was top tier some of the finest instruments ever created came out of that place.  
 
They didn't need CNC machines or Pleck to make the Masterpiece that I own from them.