A while back, this was the million-dollar question in American soccer. There were lots of answers. With MLS seemingly headed toward success (and almost as old as the NASL ever got), not as many people care one way or the other. It's still an interesting question, however. Do I actually believe that the Colorado Caribous' fringed jersey pictured above is what killed the NASL? Of course not, but it is symbolic of the overexpansion that I think did kill it.
The most common answer has long been that the death of the NASL was all the fault of the New York Cosmos. That answer has some logic behind it. The theory is that the deep-pocketed Cosmos overspent on player salaries and forced the rest of the league into a spending race that the other teams couldn't afford. However, I think the real reason was one that damaged the financial foundations of the league a lot more severely than this did.
Three other frequently-cited reasons were the loss of the ABC television contract, FIFA's decision in 1983 to award the 1986 World Cup to Mexico rather than to the United States and the player strike at the start of the 1979 season.
The TV business did hurt. The contract that the NASL had signed with ABC after its booming 1977 season was severely cut back in 1980. In the 1978 and 1979 seasons, ABC had televised an NASL game of the week The ratings were poor, however, and by 1981, the network was showing only the NASL title game. This was a serious blow to the league, but it was a result of the NASL's problems. It didn't cause them.
Blaming the FIFA decision is a red herring. By the time of that decision, on May 20, 1983, Warner Communications, the owner of the Cosmos and the league's most important financial backer, was being overwhelmed by losses as a result of the video-games crash of 1982. That was the reason why it cut back its spending on soccer, not the World Cup decision. In the second quarter of 1983, Warner lost $283.4 million. Compared to that, the FIFA snub was small potatoes.
The 1979 strike lasted only five days, honored by only a third of the league's players. It had almost no long-term effect.
The real reason, I think, was the way that, in the late 1970s, the league lost sight of the long-term goal of steady growth and was seduced by the short-term income offered by expansion fees. The league ballooned from nine teams in 1973 to 24 teams in 1978, but then fell back to 14 by 1982. I think that expanding too much and too fast, of which the Caribous were a prime example, was the culprit.
This is the view that is put forth by Clive Toye, who knows this subject as well as anybody, maybe better. All I can do is listen to him and agree that he makes a lot of sense. Toye discusses the matter in some detail in his 2006 autobiography, A Kick in the Grass, talking about a planning group that included himself, Lamar Hunt, Lee Stern and others.
"We spend an entire year  of one weekend a month, to work on the Long Term Strategic Plan, which said among many other things: We have 18 clubs. Six are doing well. Six are okay and can be improved. Six either have to be moved to better markets or taken over by new owners or dumped....Outside that committee, Phil Woosnam [the NASL commissioner] was working on new franchises, at $3 million a pop, and when it came to a vote at the annual meeting, the idea of six new clubs coming in, with $18 million to be divided, was too strong a lure....In the main, the new owners, to put it mildly, did not have a clue....lured by the sight of crowds packing Giants Stadium, and thinking that all they needed was a franchise, a big stadium and some players, and the way ahead would be golden."
I will concede that there is no unanimity of opinion here. Toye's viewpoint is not the only one. I think it's the right one, however.