EIG was a giant failure though because it was just a cartoony escapist movie. It made less than half it's budget back in US theater sales. Heck it made less than FTB which was released 14 years prior. A new sesame street movie can't just mindlessly target 3 year olds again. If they do the movie will bomb and it will likely hurt the next Muppet movie as people will again see The Muppets as a baby franchise.
Films don't usually flop because of poor writing. There are a LOT of well written, beloved movies that flop. Labyrinth, is one... but so wasn't Christmas staple "It's a Wonderful Life," which only gained a cult following due to the copyright expiring.
EIG failed first and foremost because the idea was too brilliant to not fail. Elmo's popularity just started... Tickle Me Elmo was the last year's toy sensation. Elmo's World just started up. An Elmo movie would seem like a no brainer... except for that pesky problem of only appealing to 3 year olds. The problem was they essentially made THIS movie...
It SHOULD have been big....
but there was no money in the budget to make an actual He-Man movie. They rushed something low budget out to get it at the height of the franchises popularity and wound up helping to end it.
While that last bit can't be said for EIG (Sesame Street is still strong as ever), it was a rushed out, low budget film, that had to get out before Elmo's popularity waned. Of course, it didn't... but the idea was stronger than the concept, and that lead to the movie being a flop... yet, the writing wasn't quite the problem with the film's lack of success...
what REALLY hurt the film was the fact that mom and dad can just stay home and have 3 year old Sydney watch Elmo for free. Or at least buy one of a hundred videos to rewatch a hundred times for the price of one adult ticket.