Well, it's working for Joe Konrath[1], Randall Munroe[2], Felix Salmon[3], and others. They've got very different models, but each has company for theirs. (Not that it's easy to break in, but it's also really hard to break in to traditional publishing.) It's very strange to say that people can't make a living writing on line, while ignoring the folks who are actually doing it.
Worse is this: "If the future is one in which writers are not paid, then it also is one in which writers lack clout. And if it’s a future in which writers lack clout, then what we have is a lack, basically, of an intellectual middle class. Instead we have a sort of volunteer intellectual class, which in terms of clout starts to resemble peasants."
What gives writers clout, at a social level, is that people are reading their stuff, and taking it seriously, for reasons that may have nothing to do with the size of their paycheck. In the tech corner of the world, The GNU Manifesto and The Cathedral and the Bazaar are both essays that had a huge influence, and not because of how much either author got (belatedly) paid. Or, to be a bit of a homer, for a minute, you can't really judge pg's influence by his royalties on Hackers and Painters. I'm not sure he could live well off the royalty checks --- but I'm pretty sure no one cares.
What is a future like in which most authors of book-length texts need a day job? More like the present than one might think. Most authors need one already.
[1] http://jakonrath.blogspot.com/ --- online novelist; paid content
[2] http://xkcd.com --- online cartoonist; free content, paid swag
[3] http://blogs.reuters.com/felix-salmon/ --- the blog is his job