With certain audiences, forums are still popular and profitable. For example http://candlepowerforums.com is still the place to go for advice on flashlights, and has a thriving marketplace and following.
Flashlight porn: http://i78.photobucket.com/albums/j95/schiesz/XR19%20Ti%20PD... [SFW]
AFAICT, mcgizmo is one guy, who builds ultra high end flashlights. I believe his only sales channel is the aforementioned candlepower forums. He seems to do rather well with it. HDS systems is another flashlight maker that's one guy. Not as high end as mcgizmo (they run up to about $200). He even has his own (design circa 98) website. And it's apparently working for him - orders were backed up for weeks when I ordered mine.
A few people, making a product for an extremely narrow niche.
The more I think about it people will dump tons of money into their very niche hobbies. And the internet has only recently given people with niche interests a place to gather and hawk their projects and products. Look at how successful Kickstarter has been, doing something similar. I don't have any idea how much money Kickstarter itself is making, but they have certainly enabled people to make a decent profit on their projects that may otherwise never see the light of day.
I agree there is certainly money to be made in these extremely narrow niche markets, but is it really a sustainable living? I ran a couple projects selling flashlights or flashlight pieces on CPF, and I always broke even or made money, but I certainly couldn't have made a living doing it.
I've never seen McGizmo's financials, but I assume he makes a good chuck of change. However, I think he is the exception. He has set himself apart from everyone else and can charge whatever he wants. Maybe thats an answer to the original question in its own way too. But I really think people like McGizmo and PhotonFanatic make flashlights because they love flashlights, so its ok if they aren't making a ton of money doing it, but if they do, even better. I guess you can just lump this argument in with the do what you love crowd. but heh
IOW, just the kind of thing I would love doing :-)