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In the print world, books 'die' or become effectively unavailable when a new print run cannot be justified. Bookstores have physical limits on the number of books they can offer, so older titles naturally get pushed off the shelf in favor of new ones. Thus even assuming a level demand for books of all kinds, new books did not have to compete so strongly against the ones that had gone out of print.
However in the digital world, books effectively never go out of print. Worse (from the creative and production side of things), anything out of copyright is effectively, conveniently, and legally free to anyone that wants it. So each new title has to compete against a larger and larger pool of pre-existing books.
Moreover, demand for books is going down, not up. Everyone has a fixed budget of time, and with the web, social networking, etc., more time is taken up with a variety of non-reading activities.
None of this has to do with piracy of course - it is just the expected result of widely observable trends. DRM is rather consumer unfriendly, as are prices that rival that of hard cover books. Publishers may as well try getting rid of the former, and lowering the latter, and stop deluding themselves about the effects of piracy. Like the music industry, they are in for some big changes, but there is no avoiding that.
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