Blizzard game director Jay Wilson recently penned a post outlining the fact that there won't be a Team Deathmatch mode for Diablo III - at least not anytime in the near future. The initial plan was to release a patch with the new mode as soon as possible but after extensive testing, the team determined it simply wasn't good enough and scrapped the idea altogether.
Wilson said one of the main issues with the Team Deathmatch mode was depth. He pointed out that simply fighting each other with no objective or choices to make got old relatively quickly. The company brought in a lot of people to test out the new game mode and while some found it entertaining, most said they wouldn't invest more than a few hours into it.
The director also highlighted the fact that class balance was another serious issue with the game mode. The title was initially designed to be a PvE (Player versus Environment) game and thus, they never compromised on player abilities with PvP balance in mind. While this reportedly works fine for 1v1 games, Team Deathmatch felt very hardcore because a lot of consideration had to be given to class balance. Ultimately, Blizzard didn't think it would be good for the game as a whole.
It's not all bad news for Diablo fans, however, as 1v1 dueling is still scheduled to be added in patch 1.0.7 sometime after the new year. As for Team Deathmatch, they will be starting over from scratch but not before exploring some other options first.