It's been that way with the 5-series for years. BMW's best car and all anyone wants is an SUV. 3-series sales aren't anywhere near where they used to be, either. Biggest seller is always the X5 or X3, depending on which one BMW has built the most of each month as there are few in-stock and most are special-ordered these days.
It's a lot like the hi-fi industry—but opposite. No one buys large speakers anymore. Everyone wants sound bars and small satellites. That doesn't mean it's the best tool for the job, it's just what people think they want.
I don't think the next-Gen issue is the problem. Many customers don't want what BMW is putting into the new cars and would just prefer a simpler presentation of features and better ease-of-use in the OS. Add Bluetooth and backup camera to an E34 and you've got the perfect BMW with climate controls you can easily access intuitively. Have you had the chance to try the new X1 with not shift knob and no iDrive controller? The shape of things to come for all BMWs, sadly.