When Dragon and Dungeon stopped I strongly considered Paizo products to keep me happy. Then 4E was announced in August. At that point I was concerned that a subscription to Paizo would convert to 4E at some point in the future and I did not choose to subscribe. I can appreciate WotC's desire to breathe new life into a product nearing the end of its product life cycle with a core aging market base. Targeting a new, younger generation with a new product breathes new cash flow. They also want to capitalize on the "Dungeons and Dragons" brand loyalty. In my opinion they have seriously fractured the market by creating the 3.5E vs. 4E schism. Market fragmentation (by introducing so many different campaign settings) was one of the key reasons TSR went under (at least that's what was said at seminars when 3E was announced and that was the reason for the OGL because the support costs for each setting didn't justify sales). WotC should have announced an entirely new product without the D&D moniker. Even if people saw many similarities, it wouldn't have created such a resentment in the aging market base and would have encouraged them to try out the new product without the preconceived notion that all of the existing product and brand loyalty would be thrown out the window or end up on the shelves at Half-Price Books at a fraction of the cost. They wanted to have their pie and eat it too.
Paizo created a new setting which has some appeal to me if I can ensure that the adventures are generic enough that they can be modified for my own campaign and if I know there will not be a conversion to 3.75 or 4E. You have to stick to some rules or at least put the bandages for tough rules out there as a package so that they are easy for DMs to apply or not apply by their choice. I used to buy a lot of Dungeon Crawl books until the 4E announcement came out, so even though I am just one person, I am sure that there are probably others out there that feel similarly and a drop in sales probably was noted. I for one would be perfectly happy if Paizo stuck with 3.5, but the possibility of a future transition is what keeps me from actually moving forward. If I knew that 3.5 was going to be continued in Pathfinder, then I am on board and will dig out my credit card. As it stands now, I'll buy the last remaining 3.5 products out there and rely on those and my creativity assuming that I can find a group in the future that hasn't converted to 4E+.