I offer this challenge to traditional publishers (the NY Big 6 plus the major CBA houses): If you want to serve your readers, you need to be giving them more choices, not less. I know you are rejecting a lot of good books, books of high writing quality and excellent story-telling, all because you don’t think they will sell. I have heard this multiple times from agents and editors: “Your writing is great! I can’t sell it.”

Okay, then, open a new imprint—call it Breakout Books, or something similar. Use it to e-publish that next tier of books that you really want to paper publish but don’t think you can make money on. Figure out how to do it on the cheap. Produce good covers, but don’t agonize over them in committee. Mini-edit the book, rather than apply sequential story, line, copy, proof-reading; make it just good enough. Ditch all publicity except catalogue listing. Heck, that’s pretty much how it is anyhow, right? Get the book to the market in 4 months instead of 24. Price them competitively with indie books.

Do this for about double the number of books you publish in the traditional way, or maybe for any book the acquisitions editor brings to the pub committee (indicating the book has obvious merit), but which doesn’t pass the committee. Try this for a couple of years. These books will have the backing of a major house, the vetting by an agent and acquisitions editor, a little attention by the ones readers consider gatekeepers, and thus might attract the traditional audiences of your house. Do it for books you really like but aren’t sure will sell.
You might be surprised at the results. You might find a few books that will self-fund their subsequent paper production. The ones that won’t sell will have minimal overhead expense, no warehousing expense, no distribution costs, and almost no returns.

You would be serving your readers, I believe. I don’t see how you can go wrong, and it might just save your rapidly shrinking businesses.