LD was a hit. Let's not forget there were still many without VCRs of either kind then as well. I ran a video store then, and we carried LD until 1999-2000. We had thousands of titles, and there were over 10,000 available. From LD came all of your Special Editions, Commentary, Director's Cuts, extras, etc. LaserDisc was the great format of the late 80's and early 90's. There was no other way to experience the video and audio quality they delivered. When I saw the first public demonstration of what was to become DVD, I was shocked. It looked like a realy low-bitrate AVI or Quicktime. Sony's MMCD version was much better, but had its own set of issues. "Is this what you're giving us instead of LD?" I recall myself saying. The first DVDs were weak, and we had them long before most of the US (I found out later). The whole first batch was recalled, and meanwhile LD was still selling and renting well. Its really only when they decided to end it with "The Matrix," that the deal was done.
I still have quite a few obscure LDs that will likely never see the light of day on any HD format, and not that it would matter (SD origin, or quality not excellent from source). I am still suprised how many bizarre catalog titles finally made it to DVD, but for many, it took over 20 years from the original LD release.
I remember when they were filming a Mel Gibson movie in the parking lot, and I went to have Mel sign my Lethal Weapon LaserDisc. He looked at it, and said "what the hell is this?" (in Australian accent). "It's a movie!" I said. He was confused. He'd never seen one.
It was a specialty, but one store (Dave's) had LD exclusively for many years, and was quite profitable. Only when DVD came around, did it finally kill the independent video store.
Somewhere I have a photo of a hanging mobile comprised entirely of LDs. They sure were cool to look at.