RSS readers are fine, there's tons of them available. There's no need for it to be built into a browser or email client and there's definitely no need for it to be a hosted service. Firefox did the right thing. Open source, dedicated RSS client software is readily available and likely needs very little maintenance at this point, so we don't have to worry about useless middle-men getting bored.

Every site I've cared to "subscribe" to has an RSS feed somewhere, so that end of things is still alive and well. I don't see any reason for them to stop either, I still end up at their site (assuming they only publish links) and that's all they can hope for.