It's not just LCCs decimating them in Europe, it's high speed day trains. Why go for an overnight journey from Paris to Frankfurt, when the day train now takes less than 4 hours?
I do enjoy (and sleep well on) both overnight trains and ferries, and use them on occasion, particularly when they save me a lot of travel time (they're effectively using up "dead time"). But I can see how they're difficult to run, particularly as a niche enterprise. Not only do you have to staff the train, but also all the signalling (depending on the freight usage of the lines), any stations they call at, often coordinate fairly elaborate recoupling and locomotive changing exercises in the dead of night... And that's often with quirky, legacy stock which is difficult to maintain and sees fairly intensive usage to make it pay. The glory days are definitely over, but I can see some niche lines remaining. There's currently some really impressive investment into the Caledonian Sleeper, for example:
Caledonian Sleeper ? The dawn of the new sleeper train