Hard to believe hysteria was from the people behind animaniacs and tiny toons. Clearly the later half of the 90s hadn't been as kind to them. Given one of their last outputs was pinky Elmyra and the brain.
They lost favor due to Pokémon, as you mentioned. WB wanted to start culling their animation department since anime was the way bigger hit. Being fair, it is pretty easy to see why this was happening. Even past, anime look cool, Animaniacs and Tiny Toons were heavily drenched in dated references for adults that kids would never get. They were shows clearly aimed at older demographics that grew up with the toons they were copying. It wasn’t just kids not liking comedies, I think plenty of Cartoon Cartoons and NickToons would put that to rest.
Remember to everyone saying anime is beating western animation (or was recently) this isn't a new thing. Kids in the later. Half of the decade were losing interest in western cartoons for the likes of pokemon, digimon, and yugioh so bad they had to often pair the two together on the blocks.
There is a difference between Pokémon beating them out, and the current rolling over and dying that the west is in now. Even around that time, shows like Static Shock were leveling pretty well with their Japanese competition on Kids WB. Hell, PowerPuff Girls was a staple of Toonami, so good even the Japanese would try and get their hands on it. And to say nothing of the Sponge.
What really hindered the West in taking on anime was its censorship. Fights were too pussied out compared to the spectacles, with blood, you would see in DBZ. The closest the West ever got to that kind of violence was arguably early 2000s DC between Justice League and Teen Titans, both pretty big series for their time. Ben 10 would also get huge, though more for its Pokémon level merchandising potential.
Comedies were what the West did best, and primarily CN and Nickelodeon if we are being honest. Those were the two networks with the loosest rule sets that allowed for raunchier humor that appealed across the spectrum. When you look at CN’s most viewed content, Scooby Doo, Ben 10, Star Wars, Total Drama and Adventure Time were able to achieve DBZ ratings.
Nowadays, there is nothing like the above. The West has fully given up on action besides shittily animated adult cape slop like Invincible, and the comedies don’t have the raunch anymore to make them popular, and yes, even the adult ones are so much lesser than a South Park or Family Guy.