On top of not being backward compatible, JPEG 2000 was significantly slower and required more RAM to decode, which at the time it was released was a much bigger deal than that is today. And for all of its technical improvements for some domains (transparency, large images without tiling, multiple color spaces), it was not substantially better at compressing images with high contrast edges and high texture frequency regions at low bitrates because it just replaced JPEG's block artifacts with its own substantial smoothing and ringing artifacts.