The comic exploited the story telling potential of the comic book medium and was essentially a critique on the [then] current superhero climate.
The movie didn't even try to differentiate itself from existing superhero/action films and actually adopted many of the clichéd concepts of modern day filmmaking in a non-ironic way, thus missing the point.
Sounds too inside-baseball for the moviegoing audience to care. So what if movies like
X-Men and
Spider-Man et al are kinda stoopid. Everyone knows that. What's the point of making a movie telling us what we already know? If a filmmaker objects to the idiocy of superhero movies, they could make a non-superhero art film for those people in the audience who look down their noses at the likes of
X-Men and
Spider-Man et al.
Which really isn't
Shazam's point. Watchmen was a watershed in Western comics because it looked at the format in which graphic stories were told and made use of some of the inherent characteristics of that format which had been scattered about in other works, but never pulled into a coherent whole (see
Stone Cold Sisko's comments above) - while simultaneously deconstructing superheroes and exploring some of the inherent contradictions that had arisen in the genre in the Post-VietNam era (primarily the idea that power could ever be wielded in purely good ways). It's the
Citizen Kane of comics, and like that movie has some issues from a purely storytelling point of view - because it is not simply a narrative.
The only way to ever put an authentic version of
Watchmen on film would be to use the tropes of superhero
films in a similarly holistic way and simultaneously turn the heroic assumptions put forth in superhero movies on their heads. It's not about those movies being dumb or unartistic - quite the opposite. It's about exploring the hidden depths in the assumptions of such tales.
By adhering so closely to the source material, Snyder managed to miss the entire point of it. He threw some tropes in there, but they were just his favorite ones - not anything he'd given any thought to in regards to the genre. And he also was too faithful to the Cold War/ Post-Watergate aspects of the story which are very specific to their moment in time. Had he used a more Post-9/11 sensibility, he actually would have created a work more faithful to the heart of the book.
The problem with Watchmen the movie is that it didn't succeed even at the level we expect from a decent superhero flick. Characters we care about. A storyline with a decent amount of suspense, plot twists, inherent interest and not too many dead spots. You know - the basics. Iron Man and Spider-Man 2 are the level of "excellence" the moviegoing public expects from movies in this genre. If they want art, they can check out The Hurt Locker playing in the next theater over.
Watchmen is specifically and inescapably "arty". It's a post-modern metanarrative written specifically to be a post-modern metanarrative - it is as much, if not more, about the genre as it is about the story. There was never any chance that it would be along the lines of
Iron Man or
Spider-Man 2 - that is you could never bend the plot and characters around to that form without producing something completely unrecognizable as
Watchmen. The characters are neither original (Rorschach = Travis Bickle) nor engaging. Their coldness and alienation is kind of the point. You can't care about them - they are either monstrous or pathetic people.
All of which is by way of saying that the goal to make a big budget action movie hit out of
Watchmen was misguided from the inception. It made some money, sure, because just about anything attached to a popular written (or drawn) work these days brings people out in droves. But it was bound to be unsatisfying to most - because, as you say, it couldn't fulfill the basic movie "needs" of an audience (it simply doesn't have them in its construction), and it couldn't be what it is if they were trying to make a regular superhero flick out of it.