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I'm with Andrew H. on this one.
There isn't much the publishers could have done in 2005 or 2006 to make them more competitive against one of the industry's own retailers.
They didn't have the option of abandoning the print business at a time when 99.9% of their revenues are from print.
They don't have the option to favor brick & mortar retailers over online retailers, both in terms of getting product out and not acting anti-competitively.
They can't change the basic dynamics of the industry, e.g. the largest physical bookstores can only carry around 150,000 titles while online can carry millions. (And an ebook store that could only carry 150,000 titles would already be considered a joke.)
They can't alter the fact that they are competing against new forms of entertainment, notably the Internet and video games.
Publishers can't get together and agree to cap advances at a certain amount, since that kind of collaboration is illegal. (And probably wouldn't work anyway, someone would break the agreement.)
The big publishers have spent a lot of time trying to develop mid-list talent, only to find that it's not working.
Most importantly, it's extremely difficult for multiple established companies to swing away from their entire business, and take huge losses while transitioning to a completely unknown new business. It's much easier for Amazon, which has a diverse business and is a single entity. Even then it's not easy, and they're mostly able to do so because management pushes very hard to innovate, and isn't afraid to take some losses to achieve a long-term goal -- something that few people, let alone CEO's, are willing to do.
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