After hearing the news of Twin Peaks' possible renewal I wondered, why wasn't it renewed in the 90's? As far as I remember, the show ended quite abruptly without a good closing.
I feel the 'Declining Ratings' segment in Twin Peaks' Wikipedia page sums up the reasons pretty well (but I'll sum them up even further with bullet points below).
With the resolution of Twin Peaks' main drawing point (Laura Palmer's murder) in the middle of the second season, and with subsequent story lines becoming more obscure and drawn out, public interest began to wane, and interest in the program seemed over. This discontent, coupled with ABC changing its timeslot on a number of occasions, led to a huge drop in ratings after being one of the most-watched television programs in the United States in 1990. A week after the season's 15th episode placed 85th in the ratings out of 89 shows[...]
ABC agreed to air the remaining six episodes to finish the season. However, due to the Gulf War, Twin Peaks was taken off its usual time slot "for six weeks out of eight" in early 1991, according to Frost, preventing the show from maintaining audience interest. In the final episodes, Agent Cooper was given a love interest, Annie Blackburn (Heather Graham), to replace the intended story arc with Audrey Horne. According to Frost, a female cast member (Lara Flynn Boyle) who was romantically involved with Kyle MacLachlan at the time had effectively vetoed the Audrey-Cooper relationship, forcing the writers to come up with an alternative. Sherilyn Fenn supported this claim in 2014 interview, stating, "[Boyle] was mad that my character was getting more attention, so then Kyle started saying that his character shouldn’t be with my character because it doesn’t look good, ’cause I’m too young. ... I was not happy about it. It was stupid." The series finale did not sufficiently boost interest, despite being written to end on a deliberate audience-baiting cliffhanger, and the show was not renewed for a third season, leaving the new cliffhanger unresolved.
Lynch expressed his regret at having resolved the Laura Palmer murder, stating he and Frost had never intended for the series to answer the question and that doing so "killed the goose that laid the golden eggs". Lynch blames network pressure for the decision to resolve the Palmer storyline prematurely. Frost agreed, noting that people at the network had in fact wanted the killer to be revealed by the end of season one. [...] Looking back, Frost has admitted that he wished he and Lynch had "worked out a smoother transition" between storylines and that the Laura Palmer story was a "tough act to follow". Regarding the second season, Frost felt that "perhaps the storytelling wasn't quite as taut or as fraught with emotion".
So, in short:
- After the main mystery driving the show (Laura Palmer's murder) has been resolved and ABC kept changing the time slot, the audience lost interest and there was a huge drop in the ratings;
- The Gulf War took center stage and the show was frequently pre-empted;
- Feuds between the actors sabotaged storylines;
- Co-creator Mark Frost admits that the 2nd season had a more sprawling and less focused plot.
All of this led to the show being cancelled after ending on a cliffhanger.