It's not that the fad is over or that they aren't popular anymore, territorial disputes over the Liancourt Rocks are to blame. Tensions were especially high after Lee Myungbak made a high-profile visit to the Liancourt Rocks and Hallyu Stars claiming that they belong to Korea. On the flip side of things, KARA received some heat in Korea for not taking a stance on the issue when they were asked about it.
http://www.allkpop.com/2012/11/kohaku-uta-gassen-to-not-feature-any-korean-artists-this-year