My guess is that it is. Anecdotally, I would guess that only my programmer or tech industry friends and me seriously care about getting updates from projects, or from people they don't know socially IRL. I would guess that my non-programmer friends want social updates from people, which social networks do provide, and they are somewhat interested in what the rest of the world is talking about, but just as a form of entertainment, so there's no need to group all the updates together because it's just as fun to check each individual site every now and then.

I guess there is a crowd of political news buffs too, people who would want comprehensive coverage of various takes on various recent events, but I don't know any personally (who aren't also programmers). If you don't care about multiple points of view then reading one or two newspapers or magazines is sufficient and there's no need for a feed reader.

There's also journalists and PR people whose job involves keeping up with zillions of updates.

And podcasting.

So, my guess is, yes, it's just a niche: programmers, a small subset of news buffs, media professionals, and podcasting.

Looking at the bright side, it doesn't matter to me if most websites drop RSS as long as the ones most relevant to my niche continue to use it; so if RSS becomes forgotten about by most people but is still used by websites that target programmers and by news websites, that's enough for me.