I think to blame Pokemons lower sales on it being a 'fad' is too hasty. I mean, by that logic, was Final Fantasy a 'fad' of the 90s and is it going to die soon because every game since FFVII has been declining in sales?
The reasons for Pokemons sales being lower and lower is simple stagnation of the series (way too many Pokemon games), competition (Dragon Quest Monsters, DiGiMon, Monster Rancher, Monster Hunter, etc) and the 'sequel effect'.
Pokemon is in no threat of dying and many changes to its model could help it (Pokemon MMO, a good Pokemon Console game, etc). But Nintendo also probably doesn't want to change it at this time, when they still can sell 12+ million copies every time they make a single main game. You don't change any formula to any series when that's going on.