Not to mention, are there that many people that even write blogs anymore, or is there maybe another more modern use for news readers that I'm not aware of?
There are thousands upon thousands of people who write blogs on wordpress.com, Blogger, and even older sites like LiveJournal and Xanga. Not to mention all the technically inclined folks who run their own with self-hosted WordPress, Jekyll, and friends.
The number of blog producers doesn't even need to be that large (relatively speaking) in order for a newsreader to be beneficial to blog consumers. Say that there were 10,000 blogs in the world. If you were interested in more than ten or so, it would be a hassle to visit each one on a regular basis to check for updates.
And yes, RSS is used beyond just blogs. Mainstream news sites often publish RSS feeds of their categories. News aggregator sites like HN tend to have RSS feeds as well.
Do people want a "better" news reader? I feel this would be profitable if you stopped wasting so much money.