If you want to specifically choose your sources, I think you're right. If you're happy with a 'best of' on a topic by topic basis, newsletters can/do work.

With newsletters, one is throwing their reading experience to the mercy of the newsletter editor.

This is part of the appeal for many non-power readers. The majority are not particularly interested in curating or even controlling their sources and are happy to outsource it to either trusted editors (see almost the entire print media or something like Techmeme) or the "cloud" (e.g. Reddit or Hacker News).