Flickr was the only option for a while, so they captured say 60% of people who published photographs online. Of that 60%, many were pro but a lot were consumer. When better alternatives for the consumers came along, they left. And it looks like regression on Flickr's part.
Actually I'd say that Flickr is now in a niche which it could make money from pretty well: if people stop expecting it to be the business it once was.
And Facebook could upgrade that experience in about five minutes if they start getting threatened on that front.
Improving photo management is not in their interest. Having a small number of photos that are easily accessible increases engagement, because people interact more if they're looking at the same photos (comments, etc.) If they made it easy for people to navigate to separate places in a large photo collection, they'd need new ways to push people towards interacting with each other.
Sure, but getting left behind as the photo sharing platform of choice is much more expensive. Also, they might make it a paid-for service. Flickr Pro is like $20/month? Facebook PhotoHD could probably be $5/month.
I've been with Flickr for years now, am a Pro user, and nothing else comes close for a photography enthusiast. IMHO all it would take is few key redesigns and better mobile apps that would make the photography community really happy to stick with it.