He is not in the AHL because of his contract, that is an excuse for people who don't want to admit how bad it got. The Kings are paying more in actual dollars and the same amount of cap space to have Richards in the AHL and his replacement Shore in the NHL as they would with just Richards in the NHL.
Richards is in the AHL because he doesn't score enough to play a top six role, he isn't physical enough to play a gritty fourth line role and he is absolutely terrible defensively so he can't play that role. It's easy to look at the offensive numbers being terrible, and MR was on pace for 26 points, but the more alarming thing was just how bad he was defensively, if Richards had been able to be even competent defensively he could have slid into a checking role and this thread would never exist, but it was the whole package with this collapse, offense, defense and physicality all basically ceased to exist.
People always look for some kind of reason why the collapse happened, concussions, wear and tear, shoulder, ankle, partying, viral infections but no one really knows. The only thing for sure is that his play over his last 125 or so games in the NHL did not warrant a spot on the Kings so he was sent to the Monarchs. I am in the minority of my fellow Kings fans on Richards (have been for over a year now) but I don't see him back in the NHL again, I think the Kings buy him out and he heads to Europe or stays in the AHL if he doesn't want to move. I don't think fans who are usually asleep when the Kings are on realized just how bad it got, teams just don't send guys making $6m a year to the minors unless they have lost all hope, which I think the Kings have done with Richards.