Agent/author Richard Curtis has a superb overview on the publishing industry:

Had the plethora of mergers and acquisitions that shrank the number of publishers to a handful of behemoths achieved a literary renaissance, perhaps we could rationalize that it was worth all the turmoil. But it did not. After each consolidation the patient continued to hemorrhage. It became obvious that gigantic publishers hemorrhage the same way that tiny ones do; it’s just that gigantic publishers have more blood to lose and the losses can be disguised in the financial reports of their parent companies. Like many a dying patient, publishers have lived in denial about the underlying cause of their chronic losses. Yet, the reason has been in plain sight all along: the returnability of books is killing the business.

Fear of provoking Federal antitrust prosecution inhibited publishers from combining to combat the practice of returnability, even though it was draining the vitality of the industry. What was worse, the vested interests of the retail bookstore business insured that the system would never change. Powerful chain store entrepreneurs shrewdly recognized that returns are a form of currency and found a way to systematically manipulate them. Instead of paying cash for new titles, the chains simply returned slow-moving stock and applied the credit toward the purchase. No money changed hands – just paper.

Read all of it here.