The Oscar-nominated writer said that 12 Years a Slave had "sucked up all the guilt about black people" before the Nelson Mandela biopic starring Idris Elba was released.
Nicholson is thought to have spent 15 years working on the script, including 33 drafts.
"I think it worked superbly," he told the Daily Telegraph. "I'm incredibly proud of this film. Unfortunately it didn't get the kind of acclaim that I wanted. It didn't get Oscars.
"12 Years a Slave came out in America and that sucked up all the guilt about black people that was available."
He continued: "They were so exhausted feeling guilty about slavery that I don't think there was much left over to be nice about our film. So our film didn't do as well as we'd hoped, which was a bit heartbreaking.
"We showed it to test audiences very extensively and it got astounding responses. These things are measured in percentages and it was in the high 90s every time. So, honestly, we thought we had a winner. And when it didn't become a winner it was devastating, actually, it was very distressing.
"I really thought it was going to win lots of awards, partly because it's a good story but also because I thought I'd done a really good job and the director had done a really good job. So it has been very tough for me. Some things work and some things don't. You just have to soldier on."
Nicholson also suggested that Mandela's death shortly before the time of release hurt the film's potential at the box office.
"Mandela died as I was in the royal premiere with Will and Kate. Suddenly the word came through that he died. We were deluged with Mandela stuff and after a week we all thought, please, take it away, we've heard enough about Mandela," he said.
He also described Mandela's speeches as "boring", and said that nearly all of the ones used in the films were created by himself.
"All but one of the speeches were made up by me because his own speeches are so boring. I know it sounds outrageous to say a thing like that, but when he came out of prison he made a speech and, God, you fell asleep," he said.
"It's a sadness. In all the speeches there's always a good line, but they're not very good."
Mandela: Long Walk To Freedom has yet to pass its $35 million budget.
Watch Idris Elba discuss the film with Digital Spy below: