Second Life is only one instance of a new medium. That's too small a sample to declare the whole medium non-viable. MMOs are really another example of the same medium. (Though the structure of most "games" devolves into exploitation of variable reward schedules and everything becomes pretty much a resort-casino.)
While it can be argued that the subsidy resulted in some shady areas of SL, it should be noted that the massive decline in SL's popularity happened after they were removed, gambling was banned, age verification happened, etc etc. So it's hardly arguable that the subsidies killed SL.
It's quite possible that the online world will stop having single hyped winners but a series of semi-successful ventures.
The change might happen once the majority of the human populace is online. Folks online will likely continue the habits they formed initially until something much, much better comes along. This will be higher bar than the online-versus-not-online bar.