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Depends on what you consider paintball.
If by that you mean the tournament pro level paintball industry, well it is not really dying, but it is metamorphosing as the industry responds to the economic crisis. The days of unlimited sponsorships and industry gratis is long gone -- they just don't have the money. Independent paintball firms are being supplanted by mega corporate distributors and the mom and pop paintball store is becoming a thing of the past thanks to the internet world. The industry is changing as it recognizes that NPPL style pro level paintball is not the only game out there in the paintball world. You will see a resurgence of woods, and especially pump play, over the next several years as paintball goes back to its roots. One just has to look at the industry interest in scenario and big game promotions. There is money to be made there. I see the weekend walk on player saving his/her money and participating in only select events over the summer as opposed to the every Sunday speedball habit.
Paintball is not dying per se, however it isn't the healthiest industry out there either. Face it, when mom and dad, or the average paintballer has to shell out close to $100 a day to play paintball, in these economic times, that money may go to the grocery bill or in the gas tank before it ever gets to the paintball field.
Over the next several years I see the industry reducing the amount of marker manufacturers out there, or at least cutting back on the model years. I mean anyone who has held an '08 ego has basically held an '09 -- there may be some simple milling differences, but the guts are pretty much the same. And in this day and age, who has a grand laying around just to satisfy the need to upgrade year after year. Some of the smaller manufacturers will go away, or merge with others. Smart Parts hasn't helped the world of open source marker development with their patent infringement lawsuits and the subsequent licensing agreements taking r&d money out of the hands of those who might even consider developing something new. At least in the electro field where SP runs amok.
There is some innovation in the industry though -- spyder has their 'new' 11mm pb pistol, Tippman with the TPX, and CCM is developing some great stuff in terms of the high end pump markers. But basically the technology of the paintball marker isn't that different then it was 10 years ago. The corporate environment has taken some of the fun out of trying new things and presenting them to a niche community to evaluate. Nowadays everything has focus groups and business plans, litigation, and patent enforcement -- really puts the squelch on development.
So... TL;DR -- Paintball is sick, but not dead... at least not yet.
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