No, they're both. The sets we loved as kids still exist, they just don't advertise them as much as the licensed properties, but they sure as hell haven't discontinued them:
CITY is actually the world-wide best selling theme (or at least it was a few years ago)[1]. So while there are lots of other themes, just plain old Lego sets are still going strong.
[1] http://lego.gizmodo.com/5019797/everything-you-always-wanted...