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If publishers were willing to cut distributors like LightningSource (Ingram) and Content Reserve (OverDrive) and do the distribution themselves by setting up their own DRM servers they could cut out a big part of their costs. It's not like they need to handle returns, remainders, etc like with pbooks. Or they could skip having their own DRM servers (I know, dream on) and save even more money.
I'm kind of surprised a couple of the bigger pubs haven't tried self distribution. They don't need warehousing, shipping, etc. Just a few good people could handle it.
And yes, lowering the cut retailers get should be doable too I'd think. No B&M retail space, no returns to speak of, no physical stock sitting waiting to be sold and staffs the size of a small bookstore (last I heard Fictionswise was only about six people) should all combine to allow a retailer to run a profitable business even if their share was cut. Of course it's easy to say that, but I don't have all the knowledge to know if it's feasible.
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