Well: a) NewsBlogger "failed," if you want to call it that, because we were trying to do a few too many things at the time. The concept never really got tested. My.Userland, as far as I know, was never hooked up to a business model, either. The reason there are a bunch of competitors to Radio Userland is because installable software can be created and offered by hobbyists for free or on a shareware basis, which is where most of the competition is coming from at this point (Userland and a few others excluded).
b) As for people expecting to get centralized services for free and only paying for software that runs on their own machine, that's a funny thing to say right above a link to this story talking about Yahoo's 2.2 million paying subscribers to various (centralized) services. People will pay for things they like, that offer them value, that make their lives easier or better. A substantial number of Blogger users pay. Geeks are the only ones who care where the software runs, and there are a lot more non-geeks in the world than geeks.
By the previous logic, there are also a zillion weblog software competitors, since Blogger started, the vast majority installable software, instead of hosted services. And yet, I'd venture that very few compete with Blogger's or LiveJournal's revenues.