During the '90s and the early '00s, dedicated soundcards were in-demand components in much the same way GPUs are today. From what I know, Creative won, on-board sound became good enough sometime between Windows XP and Windows 7, and the audio enthusiasts moved on to external DACs and $2000 headphones. Today Creative still sells soundcards, but none of them appear to be substantial improvements over previous models.
So what other reasons could have caused the decline in interest? Was there nothing that could be improved upon? Were there improvements on the software side that made hardware redundant and/or useless? Is there any other company besides Creative, however large or small, still holding the torch for innovating in this space?
When DVDs and HDMI were becoming popular, and Windows Vista was launched, a lot of restrictions were put on drivers, I saw many people defending them claiming it was for better stability, avoiding blue screens and so on.
But a major thing the restrictions did, was restrain several of the sound cards features, most notably their 3D audio calculations that were then just starting to take off, people were making 3D audio APIs that intentionally mirrored 3D graphics API with the idea you would have both a GPU and a 3D audio processor, and you would have games where the audio was calculated with reflections, refractions and diffractions...
After that, the only use of sound cards became what the drivers still allowed you to do, that was mostly play sampled audio, so sound cards became kinda pointless.
Gone are the days of 3D audio chips, or having sound cards full of synthethizers that could create new audio on the fly.
Yamaha still manufactures sound card chips, and their current ones have way less features than the ones that they made during the sound card era.
EDIT: also forgot to point out the same restrictions kinda killed analog video too, for example before the restrictions nothing prevented people from sending arbitrary data to analog monitors, so you could have monitors with non-standard resolutions, non-square pixels, unusual bit depths (for example SGI made some monitors that happily accepted 48 bits of color) or not even having pixels at all (think vectrex) and so on. All this died and in a sense also affected video development, some features that video cards were getting at the time were removed and hardware design moved to a narrower path, more compatible with MS rules.
As for what the restrictions have to do with DRM: the point was not allow people to intercept audio and video using analog signals with perfect quality, since this would be an easy way to go around the DRM built-in on HDMI cables.