I did not misunderstand, but making a game and an expansion are very VERY different things. An expansion does NOT require a brand new graphic engine, re-thought gameplay, new models, re-thought UX and UI, redesigned server structure, way more marketing than an expansion, etc. And you need to get ALL those things right, because you're Blizzard/Activision and it's expected of you ( and you want to make money, so you need a good game ). And you're suggesting a separate team working on minor patches too... Not saying your idea is bad, I actually agree with you, a new game after WotLK would have been awesome, but I worked for big 'modern' companies, and the amount of work we think is needed for anything is almost always twice as much if not more than that.
Let's not forget than humans work there, with hierarchy, corporate pressure, differences of opinion and god knows what else ( and tbf, some of my friends worked for Blizz, and it seems like an awesome place to work at, but still... ).
Yes, they are making money with micro-transactions that do not disturb the gameplay in any way, so, fair game I say. And they did make a good game with micro-transactions, it's called Hearthstone and they are printing money ^^. No, seriously, as I said, making a new game, especially one that is supposed to be replayable as shit and on a scale like WoW vanilla was at least, is a HUGE investment in terms of time and money and also a HUGE gamble.
Making money does not mean it's not dying. It just means it's good at making money. And that makes total sense actually, they have less server costs as population lowers, but the players that's left are the most dedicated ones, or the ones just starting out ( buying all the expansions, etc. ), so they spend more money than the average joe. Less costs, more money going in : benefit going up. We're just forgetting that they're also optimizing a lot of stuff behind the scenes ( optimizing server load and bandwidth cost, optimizing payement flows, adding revenue sources ( WoW Token ) etc... ) that makes them a lot of money. Also, you never evaluate any sector by just the amount of money it produces. An example would be oil. Still makes a SHITTON of money, but they're going to die out and soon. Many other sectors and industries are facing or will face similar problems as automation comes along too.
And yes, kids play what's popular, I very much agree, but as I said, MMOs require a very specific time commitment and social mindset. Do you think it's a coincidence that MOBAs, Card games and mobile games are the most popular genres right now? It's really not, we socially move towards a 'swipe right/left' world, with comfort and availability being the prime concerns ( and i'm not talking about Tinder only, but just the convenience business in general, like Uber, Deliveroo, Amazon Echo, Spotify, etc ). It's the same for games: click on a button, get paired up with people, play for a set amount of time, then leave. It's entertainment on demand which does not mix well in a Role Playing Game where most of the fun, by definition AND design is making your fun be it on tabletop RPGs or online in MMOs. So, yeah, as we evolve as a society ( and we are evolving quickly: just ten years ago, facebook was not a thing, neither were smartphones ) and our entertainment ( games, movies, shows, etc ) are evolving with us