It works differently than pretty much every other TLD, which means it's different code paths to support.

Many registrars don't support the unique 3rd level domain setup for .name, so it can be hard to find registrars that properly support it.

There's also an associate email redirect service, which is unique to .name and probably costs money to run and maintain.

It's probably easier to support, and more valuable to sell second level .name domains.

Pretty terrible that they were considering just dropping tens of thousands of customer registrations however.

It has weird interactions with some modern browser features. For example domain isolation doesn't apply between subdomains of the same TLD, so john.smith.name and drew.smith.name don't get isolation in naive implementations.

My thoughts also, but maybe they can make more from a few sites like baby.name than they can from personal domains.