The 8-track didn't fail as much as it was
superseded by better technology. The
plethora of old 8-track players and tapes at almost every
flea market and
yard sale and the large cult following it has demonstrates that in its heyday, it had significant
market penetration.
The 8-track was invented by Bill Lear, the developer of the automatic pilot, the Lear Jet, the Lear Fan, a bunch of other cool stuff, and an incredibly smart guy in general. A friend of the inventor of the car stereo, Earl "Madman" Munz, Bill took a ride in a car with a Muntz stereo in 1963 and was so impressed that he installed Muntz players in several Lear Jets. Ever the tinkerer and inventor, Lear began taking the players apart, and developed the 8-track.
As far as the format's success, over 65,000 Motorola 8-track players were installed in Ford dashboards in 1966 alone. Manufacturing continued through the 70's and the devices were eventually pushed out of the market by the cassette by the end of that decade.
Thanks to
http://www.8trackheaven.com/history.html
http://www.rci.rutgers.edu/~dmorton/8_track_history.htm
http://www.techtv.com/audiofile/print/0,23102,3304393,00.html
for the statistics and sales information.