It sounds like they have already launched the business and so anything discouraging, even pointing out that it will appeal only to a special audience, would be pointless, and may be interpreted as mean spirited.
I would stay smack dab in the middle of the road, unless they asked me why I thought their business is not doing well. Even at that, I would have to say I have no idea (because I wouldn't).
I can think of a couple of very, very successful well known ventures that probably netted the inventors millions, but on the surface seemed like "You've got to be kidding...ha-ha-ha!".
I think you are right to stay the middle of the road and not make any discouraging remarks.