I'm not sure LL is inherently a bad idea. It is definitely making them money, but it just looks bad because they used to have fastpass for free. If they never had fastpass then I don't think it would get nearly the stink that it does. Thinking back on it I don't know why they ever decided to have free fastpass at all, unless it was to get people used to a shorter line option that they could then start charging for later. It doesn't really make business sense to increase operating costs for an option that doesn't make money.
If they didn't have lighting lane, they would likely have raised prices even higher for tickets. Who knows how much, $25 more per day, $50 more per day, even more? I personally like it as it gives another option that you can pay for if you value your time.
But, one area that it may be hurting Disney is that it makes shorter trips more feasible. We had some family members join us for the last 3 days of our last trip. For the first part of our trip we went to some parks, took it slow, didn't buy LLMP (just a couple LLSP rides on guardians lol), and it went fine. But once they got there we did LLMP and LLSP for the last few days. around $170 extra per person, but it let us do basically EVERYTHING (except for the kiddiest rides) in all 4 parks in 3 days pretty easily. You can now come for 3 or 4 days instead of a week if you use LLs and just want to do all the rides. So with around the cost of one extra park day, a family could be able to buy LLs to decrease their trip by several days.
So I think they should give more benefits and extras to people who stay at the Disney hotels/DVC to make sure their own hotels stay filled up. Even longer early entry, more extended hours, maybe a free LL per day, or 1 day of LLMP per trip for example. They should probably look at how the ticket packages price out as well. Make 1-3 day tickets crazy expensive per day and then give a big discount the longer you book for.
But then I also think an about how a big discrepancy is the price difference and pass options for Florida residents vs people traveling to WDW. Someone who is already paying for a flight, and possibly paying for onsite hotels, is getting a much worse deal than someone who just happens to live nearby. A yearly pixie pass that gives access (for what around 200 days through the year) is around the cost of 2 park days for an out of state visitor! A little over $2 per possible park day vs around $200 lol. I would look at getting rid of the pixie pass, or at least severely limiting how many reservations the lower tiers of the passes a park gets each day. They clearly make way more money on a guest buying a ticket package vs a cheap florida-only annual pass.