This is what makes stuff like closing AOL Music even sadder- AOL is in a really weird position where they're making a ton of money where they shouldn't be- they are in a prime position to do some really interesting things on the net. But they don't.
Of course, with monopolies you get the kind of perverse incentives you're describing. Phone technology and prices stagnated for a decade or two when Bell had a de facto monopoly. I would still argue that a free market tends to produce fewer monopolies than any other practical regulatory scheme, but that's a topic for another post.
You should have an asterix next to "making a ton of money."
*Past performance is not indicative of future results!