So what went wrong? According to Wikipedia, the director said the film was hurt by both Two Minute Warning - a fairly fascist "sniper at a football game" movie with Charlton Heston and John Cassavetes, released around the same time - and the fact that the film was banned in Germany in Japan (not seeing any writing out there as to why, though one of the terrorists' backers is Japanese, and in my experience, a lot of Japanese don't like to acknowledge the existence of home-grown terror, with most of my students not even realizing that such things have existed over the years) . The surprise success of Star Wars might also suggest that film audiences were hungry for something much lighter - this is around the time of the cinematic shift that Robin Wood writes about in Hollywood from Vietnam to Reagan, where the dark, critical, and raw American cinema of the 70's that Wood so loves - and that is fairly well-exemplified by Black Sunday, at least until the end of the film - was replaced with reactionary, feelgood crap courtesy of Spielberg and Lucas.
I mean, devoid of any political context, just on a gut level, who are you going to sympathize with in images like the one below? (That's Marthe Keller, as a member of Black September, being menaced in the shower by Shaw; even HE, the "cruel Israeli," doesn't have the heart to kill her, thus allowing the plot to continue):