How the Picturephone Failed

In 1964, Bell created the Picturephone in the hopes of augmenting telephone services with long-distance video chat. The technology was awesome (for the time), but also insanely expensive. It flopped, costing Bell roughly half a billion dollars and attracting few actual customers. But how did it work, and why did it fail? Behold:

And here's an amazing five-minute demo of the system from 1970, courtesy of the AT&T Archives: