The Titanic season was a rotten year. Each musical nominee had serious faults. Titanic was probably the most commercial of the four.
While Titanic lacked in character development (The writers decided to make the ship the lead in the show.), The Life had an odious subject matter that was really a fantasy by three old white men. The Life attempted to romanticize street prostitution and pimping, and you know what? That isn't a romantic topic at all and offended many people, not the least was me who thought that it ought to close before the critics saw it. The Life is one of the few shows I have truly hated. A good cast and some nice music could not redeem this bad-taste farce.
Steel Pier was a muddy story with some magical realism thrown in that was written because they couldn't get the rights to "They Shoot Horses, Don't They?" There seemed to be several borrowings from that story.
Juan Darien was actually artistically the best of this lot, but was just not commercial and was long-closed.
Titanic did a politically smart thing and announced a tour right after the nominations so all those road producers saw a possible "Best Musical Winner" in their theatre and marked an X.
"If my life weren't funny, it would just be true. And that would be unacceptable."
--Carrie Fisher