Yeah it was more or less apparent from the time the reviews first started coming in. MCA's statements since release more or less back up the anonymous statements made by the ex-dev on Joystiq re: Sega's mismanagement (specifically that Sega was never consistent in what they demanded, leading to a number of do-overs over the years, and that the publisher-demanded 8 month delay was mandated to be unproductive) but he came out defending the exec producer, who he says saved the project rather than doomed it.
I would have liked to have seen a sequel - they certainly set up one with the ending and at the very least they might have smoothed out a lot of their weird design ala the jump in quality from ME1 to ME2. But it looks like Obsidz's run with Sega is clearly over, and they can't justify bringing a sequel to another developer.
To be honest I think this is something we all kind of expected would happen. The combat really is rather clunky (aside from the martial arts, which I think are the most satisfying means of fighting in the game) and that more or less doomed the game. Looking back on it MCA told me at PAX what he's said after release, which is that they didn't make the game they wanted to make, and they did what they could with what circumstances gave them. I'm not even sure their original ideas ("honeycomb" instead of linear plot structure, more freedom, lighter tone) would have made it a bigger hit.
It's rough, certainly. Playing through it, AP felt a lot like Bloodlines, in that there was a certain roughness to the systems and the visual aspects of the game, but also a depth of polish and functionality with regards to more esoteric aspects of the game, particularly pertaining to choice and consequence, that is really unparalleled in Western gaming. I, as well as a lot of people, found those esoteric strengths to be more than enough to recommend the game, but the fact of the matter is that most people really don't care, and as MCA says himself, it's the base-level gameplay that appeals to people, and the base-level gameplay, while not as atrocious as that in Bloodlines, was not up to snuff of the games that AP tried to emulate. It's a really good first draft for a studio that's never done this sort of thing before, but it's not really good enough to carry it. Over time I think that AP's reputation will be rehabilitated in the same way that Bloodlines was (perhaps to a greater extent) but that always comes with the sort of cult that RPGs like this foster. But we're living in the age of $30 million averages in game budgets, and Obsidz's cult acclaim does it about as much good from a practical standpoint as, say, Kurosawa's did back in the day.
I just hope that Obsidz can capitalize on this failure gracefully. Dungeon Siege 3 is going to be their second Action RPG and it's apparently looking pretty great already, though they're de-emphasizing the usual Obsidz strengths of writing and characterization and the like. And of course I'll be really surprised if New Vegas doesn't do fantastically. The trouble is that it's looking like Obsidz can't really fulfill its potential - the ignorant gaming masses tend to characterize them as riders of Bioware's coattails. Not just in the sense of picking up sequels but in emulating design and the like, when in actuality Obsidian has a much greater focus on more complex and involved RPG system mechanics as a means to engaging players over the big feelings and epic narrative sweep that Bioware has used so effectively. You can think of Bioware as a Spielberg to Obsidz' Kubrick (you could also paint them as a Zemeckis) I don't feel like the sort of reactivity in Alpha Protocol is something that we'll be seeing more of, and I think that's a shame. Obsidz gets knocked for being too much like Bioware but in this case I think they got knocked for not being enough like Bioware. Oh well. I know Feargus has been trying to get a Baldur's Gate 3 started, maybe MCA can make some use with that.