Yep, exactly. Hayao Miyazaki said it best: otaku's continue to f*** up this industry.
It's basically a formula for failure. Otaku don't make products for the general masses, they make products for otaku. They appeal to their niche, and that's what Hinata was. A niche. She didn't appeal to general audiences because stuff that caters to otaku tend to have that stigma. Like, some folks have to freaking realize that being an otaku isn't something you wear as a badge of honor in Japan. It's something you'll be ridiculed for, at best you can have some mild otaku inclinations and be safe. Hell, our weebs are horrifying to them from what I hear. We might see a lot of anime being produced now for otaku audiences, but they rarely ever make the kinds of money you get with a mass appeal show
When these guys came in and made the show cater to Hinata and her fanbase, that took away the mass market appeal. They sacrificed the story and the characters for this, and audiences reacted appropriately. SP and the editors, they were the ones who turned Naruto from a manga that was for general audiences to one whose audience was far more of a niche than they realized.