I'd agree. Open source businesses have never been able to extract the value that closed source business can. Imagine if Oracle made their database open source; a dozen repackages would pop up, and Oracle's revenue would drop to a fraction of its former level.
Redhat is the perfect example. Compare their market cap. to OS vendors which are closed source: VMWare, Microsoft, and Apple. It's a pittance. Profit is only $150M a year depite the dominance of Linux in the server market. Oracle itself is valued at $150 billion. And for every Redhat, there's a Mandriva or a VA Linux.
The problem with selling service and support is that you have no incentive to make the product better or easier to use, and every incentive to make it usable only by experts, with a support contract. It's a bad business all around. And if the product is open source, it's easy enough to not pay for even if a need for support is baked into the product.
Open source can be a business. It's a viable strategy if you need a differentiator to compete with more established competitors, and the total addressable market you're looking to disrupt is ginormous. However, it's not a particularly good one in relative terms. The revenue generated per dollar of R&D is so small that it's difficult to fund innovation.
I think the second paragraph highlights the reason:
yes, open source companies make much less money than closed source alternatives, but in some markets closed source cannot compete with the OS equivalent -- e.g. most servers run on open source operating systems.
