I'm not sure the Internet is totally to blame here. Before the days of the 'Net, shady "agents" placed ads in the back of Writers' Digest, right near the ones by the bogus poetry contest people, but bigger than the ones for envelope-stuffing scams. At least now the potential marks have access to a plethora of discussion forums, blogs, and informative websites that (if they bother to read them, anyway) will help keep them from falling prey to the scammers.
I was chatting with a lady at the grocery store a while back. She came from an interesting (and traumatic) background, and had written a book about it. It seemed to me -- and admittedly I'm totally guessing here -- that the book might have considerable commercial potential. She was spending many thousands of dollars to have it produced. She had never even considered submitting it to a publisher. Not only was she under the impression that many/most authors paid for publication, but she was firmly convinced that a real publisher would rewrite her book into something totally different. One of the shadier vanity presses clearly had its hooks into her and sold her all the usual lies, along with the deluxe package. Unfortunate, really, because I think she'd have had a good chance of selling her book, but instead she was spending a ridiculous amount of money publishing something that would never sell to anyone she didn't know personally. I told her about MobileRead, but she's never showed up.
The bogus agents, the vanity presses, and all those other parasites of the market ... there's a special place in hell for them. They don't just steal money; they steal writers' dreams.
What's funny, I suppose, is that when/if I ever finish what I'm writing right now, if it ever sees print it'll be POD, so I can have a few copies to gaze lovingly at and pass around to friends. I'll probably put the ebook on Smashwords so y'all can spend a couple of bucks to find out whether that Worldwalker person can write anything but forum posts, and maybe sell enough to buy a pizza. But that's different. I
know the thing has zero commercial potential. It's just a story that's stuck in my head and I have to write it out of there. There are no dreams involved.