Didn't scale well. Largely unmoderated so filled with illegal content. Nobody wants to deal with it without getting paid for it somehow.

I never was admin of a NNTP server, but I don't think it's true about scaling or moderation.

From what I know when you're admin, you decide which groups you allow on your server. The controversial stuff is really on groups starting with "alt." which are as I understand created ad-hoc. "alt.binaries" for example is where it's mostly pirated stuff is at. I saw many servers that had restricted list of groups, and "alt.binaries" was often restricted, partially because it might be pirated, partially to reduce disk footprint.

As for moderation. Once you have server you can moderate and send messages that will remove offending content from any group. Because it is decentralized it is really up to admins of other NNTP servers to decide whether they will respect your moderation messages or not.