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Its really quite simple. 600 years ago some people got mad at Rome, broke with it and started their own ecclesial groups. They did away with most of the theology and praxis of the The Church, both Latin and Orthodox, claiming they found a mandate to do so in the Scriptures by using a power of scriptural interpretation which had apparently laid dormant for the first 1500 years of the life of The Church. That "every man a pope" idea has lead to the present what, 3000 or so Protestant sects. From the point of view of The Church, the Protestants have denied what The Church always and everywhere believed and preach, as I said, a "new gospel". That makes you heretics in the eyes of The Church and of its children.

We of course would say the apostasy predated Luther:)

I would like to correct this urban myth that there are 3,000 Protestant denominations.

Throughout this book we have examined the Roman Catholic apologist’s primary argument against sola Scriptura and Protestantism; namely, that sola Scriptura produces doctrinal anarchy as is witnessed in the 25,000 Protestant denominations extant today. We have all along assumed the soundness of the premise that in fact there are 25,000 Protestant denominations; and we have shown that—even if this figure is correct—the Roman Catholic argument falls to the ground since it compares apples to oranges. We have just one more little detail to address before we can close; namely, the correctness of the infamous 25,000-Protestant-denominations figure itself.
When this figure first surfaced among Roman Catholic apologists, it started at 20,000 Protestant denominations, grew to 23,000 Protestant denominations, then to 25,000 Protestant denominations. More recently, that figure has been inflated to 28,000, to over 32,000. These days, many Roman Catholic apologists feel content simply to calculate a daily rate of growth (based on their previous adherence to the original benchmark figure of 20,000) that they can then use as a basis for projecting just how many Protestant denominations there were, or will be, in any given year. But just where does this figure originate?
I have posed this question over and over again to many different Roman Catholic apologists, none of whom were able to verify the source with certainty. In most cases, one Roman Catholic apologist would claim he obtained the figure from another Roman Catholic apologist. When I would ask the latter Roman Catholic apologist about the figure, it was not uncommon for that apologist to point to the former apologist as his source for the figure, creating a circle with no actual beginning. I have long suspected that, whatever the source might be, the words “denomination” and “Protestant” were being defined in a way that most of us would reject.
I have only recently been able to locate the source of this figure. I say the source because in fact there is only one source that mentions this figure independently. All other secondary sources (to which Roman Catholics sometimes make appeal) ultimately cite the same original source. That source is David A. Barrett’s World Christian Encyclopedia: A Comparative Survey of Churches and Religions in the Modern World A.D. 1900—2000 (ed. David A. Barrett; New York: Oxford University Press, 1982). This work is both comprehensive and painstakingly detailed; and its contents are quite enlightening. However, the reader who turns to this work for validation of the Roman Catholic 25,000-Protestant-denomination argument will be sadly disappointed. What follows is a synopsis of what Barrett’s work in this area really says.
First, Barrett, writing in 1982, does indeed cite a figure of 20,780 denominations in 1980, and projects that there would be as many as 22,190 denominations by 1985. This represents an increase of approximately 270 new denominations each year (Barrett, 17). What the Roman Catholic who cites this figure does not tell us (most likely because he does not know) is that most of these denominations are non-Protestant.
Barrett identifies seven major ecclesiastical “blocs” under which these 22,190 distinct denominations fall (Barrett, 14-15): (1) Roman Catholicism, which accounts for 223 denominations; (2) Protestant, which accounts for 8,196 denominations; (3) Orthodox, which accounts for 580 denominations; (4) Non-White Indigenous, which accounts for 10,956 denominations; (5) Anglican, which accounts for 240 denominations; (6) Marginal Protestant, which includes Jehovah’s Witnesses, Mormons, New Age groups, and all cults (Barrett, 14), and which accounts for 1,490 denominations; and (7) Catholic (Non-Roman), which accounts for 504 denominations.
According to Barrett’s calculations, there are 8,196 denominations within Protestantism—not 25,000 as Roman Catholic apologists so cavalierly and carelessly claim. Barrett is also quick to point out that one cannot simply assume that this number will continue to grow each year; hence, the typical Roman Catholic projection of an annual increase in this number is simply not a given. Yet even this figure is misleading; for it is clear that Barrett defines “distinct denominations” as any group that might have a slightly different emphasis than another group (such as the difference between a Baptist church that emphasizes hymns, and another Baptist church that emphasizes praise music).
No doubt the same Roman Catholic apologists who so gleefully cite the erroneous 25,000-denominations figure, and who might with just as much glee cite the revised 8,196-denominations figure, would reel at the notion that there might actually be 223 distinct denominations within Roman Catholicism! Yet that is precisely the number that Barrett cites for Roman Catholicism. Moreover, Barrett indicates in the case of Roman Catholicism that even this number can be broken down further to produce 2,942 separate “denominations”—and that was only in 1970! In that same year there were only 3,294 Protestant denominations; a difference of only 352 denominations. If we were to use the Roman Catholic apologist’s method to “project” a figure for the current day, we could no doubt postulate a number upwards of 8,000 Roman Catholic denominations today! Hence, if Roman Catholic apologists want to argue that Protestantism is splintered into 8,196 “bickering” denominations, then they must just as readily admit that their own ecclesial system is splintered into at least 2,942 bickering denominations (possibly as many as 8,000). If, on the other hand, they would rather claim that among those 2,942+ (perhaps 8,000?) Roman Catholic denominations there is “unity,” then they can have no objection to the notion that among the 8,196 Protestant denominations there is also unity.
In reality, Barrett indicates that what he means by “denomination” is any ecclesial body that retains a “jurisdiction” (i.e., semi-autonomy). As an example, Baptist denominations comprise approximately 321 of the total Protestant figure. Yet the lion’s share of Baptist denominations are independent, making them (in Barrett’s calculation) separate denominations. In other words, if there are ten Independent Baptist churches in a given city, even though all of them are identical in belief and practice, each one is counted as a separate denomination due to its autonomy in jurisdiction. This same principle applies to all independent or semi-independent denominations. And even beyond this, all Independent Baptist denominations are counted separately from all other Baptist denominations, even though there might not be a dime’s worth of difference among them. The same principle is operative in Barrett’s count of Roman Catholic denominations. He cites 194 Latin-rite denominations in 1970, by which Barrett means separate jurisdictions (or diocese). Again, a distinction is made on the basis of jurisdiction, rather than differing beliefs and practices.Upon This Slippery Rock (Calvary Press, 2002).