This really shouldn't be a surprise as Google has been slowly pulling away from Reader for a while, but Google Reader Product Manager Brian Shih has said in a Quora forum that Google+ is the main reason why Reader is dying. Apparently, Google had tried to pull developers off of Reader multiple times before, for Buzz and OpenSocial. The theory was that the Reader team was the best at building a compelling and popular social product within Google. So, developers kept being pulled from Reader to work on Google+, and eventually there weren't enough people left to make the product worthwhile.
Shih says that this hasn't been a matter of revenue vs operating cost, but really it was that Google pulled too many developers, and then essentially killed the value of Reader when it redesigned the site in late 2011. Shih says that when Google decided to remove the sharing features and replace them with G+, it essentially killed sharing in Reader, and it never recovered.