Yes, they really did bugger it up. When the A4000 and VT4000 (and then the Flyer) came out, production houses were clamoring to buy A4000's. I remember my local Amiga dealer griping about how much trouble he was having getting A4000 and A4000T's in, he was selling them quicker than he could get them. Compared to the competition, the VT was just so much of a better, and cheaper - solution.
All is not lost, though - Newtek is making money hand over fist with their TriCasters (among other products they offer), I suppose.
If you can credit one thing to Commodore, it is this - at every opportunity, it seems like they were compelled to cook their own Golden Goose rather than doing the smart thing and just collect the eggs.