Here's the creator of Freeman's Mind detailing his reasons for leaving. It'll give you some insight into the company's internal workings and why people were increasingly reluctant to sign up with them.
http://www.accursedfarms.com/escape-from-machinima/
http://www.accursedfarms.com/escape-from-machinima-part-2/
As for the faltering of machinima as a medium, that can be explained by the rise of streaming and the lack of support from developers. There are still a few independent creators, and a lot more if you count Source Filmmaker stuff as machinima, but unless a big AAA game includes features to encourage it, machinima won't be what it once was.