Traditional publishing is hugely screwed up, but I'm not sure this particular point is irrational from the publisher's point of view. If they can get the author to promote a book --- and it's increasingly common for them to demand that authors do exactly that --- then promotion doesn't come out of their own budget.
Which raises the question: if the author's doing all the promotion to readers, what do they need the publisher for?
If you're trading in physical books (which were still more than 99% of the business, in 2009[1]), there actually is a sensible answer: most physical book sales are on physical stores, so you can't sell to readers unless you first convince bookstores to sell the books. That, in turn, in the U.S. means basically convincing the buyers for the major chains that they should give you shelf space --- there are as many Borders' as all independents put together, and Barnes and Noble is way bigger than that. And the big publishers have built up personal relationships with buyers for the chains, and expertise in catering to their whims. Which can be a big deal --- see [3] for an example of a book series that's being completely repackaged because the buyers couldn't figure out to do with the first cover.
So, it's not like the chains will take anything the big publishers dish out. But the conversation about what physical books get sold in physical stores is largely a conversation between their sales guys and the chain buyers. And the only way for a self-published author to break into that conversation is to somehow sell a few thousand units through some other channel.
On the other hand, if you're willing to forgo the physical stores as a sales channel, which is starting to matter, well... less than it did in 2009, then it really isn't clear that the publishers have much else to offer you. Their other services (editing and packaging) do have value, but not nearly enough to account for their customary share of the gross.
It may be that publishers' problem in the future is going to be justifying themselves to authors --- but I try to read up on this stuff, and I'm not sure I've seen any of them putting it that way to themselves yet.
A couple of references --- Charlie Stross on ebooks
"Their other services (editing and packaging) do have value, but not nearly enough to account for their customary share of the gross."
And, as I understand it, these things can be done directly by the author. So a lot of what is left is the publisher takes on the risk - they pay for the editing, the artwork, the printing, the marketing etc up front.
Most of the risk that publishers take on is in the form of returns: retail booksellers effectively operate on consignment, which is one of the reasons the industry is so screwed up. It's also a big reason most trade published books don't earn out the advance.
Editing, layout, artwork, and editing are outsourced. If you choose to self-pub, you can hire the same people the Big 6 publishers hire, as long as you're willing to do a little legwork to discover who they are.
Kindle / ebook publishing is making the layout and printing part mostly obsolete. If you know HTML and a bit of CSS, you can write the book in native Kindle format - it's pretty similar to writing a blog post. (I tested this yesterday - it's not at all difficult.)
Once you're done, you can publish in ~24 hours. That beats the 18-24 month trade publishing cycle. The successful self-pub authors have a lot of books, and doing it yourself makes it much easier to publish a few books every year. You also get to keep 70% of the sale price vs. the standard 5-15% royalty for trade publishing.
I'm thinking long and hard before signing another trade publishing contract, that's for sure. If I do, it's going to be with the publisher's understanding that I'm fully capable of doing this myself, which should be reflected in the advance.
Outsourcing has gone farther than that --- at this point, they often outsourced even the business of coordinating the editorial and production functions, and you can hire those people too. (There's even a professional association: http://www.abpaonline.org .)
My running joke used to be that they'd outsourced everything but the rolodex. Then I found out that a lot of the production of the latest edition of my mother's "The Bond Book" (no fixed income investor should be without one!) had been outsourced to one of these guys; they'd outsourced the rolodex itself.
That depends on the author. But for what it's worth, Joe Konrath, the self-publishing advocate who wrote the original blog post, does pay for packaging assistance, and strongly recommends that others do likewise. (The right hand sidebar of his blog has links to his cover artist --- for ebooks, if you want the Amazon "buy this" page to look like anything --- and book interior designers. Editing is more of a mixed bag, but it's a very rare, and generally very experienced author whose work doesn't need a second set of eyes.)
Most knowledgeable authors don't recommend going without editing at all. They may substitute an editor for peer editing by fellow authors they trust, but it's still editing by a second set of eyes.
I know of no author who can single handily turn in something that doesn't need some grammar/spelling/etc correction help. The writer is simply too close to the work to see some of them, though there are tricks to help like having text-to-speech read the item back to you.
Ah, I miss-wrote. I meant "arranged" by the author when I said "done" by the author. As you and the other commenters say I meant an author can go out and find an editor/proof-reader/cover-artist etc. and pay them directly for their work. I've written enough reports to know full well that an author can't proof read his/her own work.
Ah gotcha. Certainly you can hire your own. A small industry of people who want to edit and willing to work for less than the big names seems to be cropping up around the self-publishing industry.
What's really going to be fun is to see how many OTHER business opportunities crop up around those who wish to self publish. As I go through my own writing and beyond I'll certainly be looking at areas that beg for such.
Which raises the question: if the author's doing all the promotion to readers, what do they need the publisher for?
If you're trading in physical books (which were still more than 99% of the business, in 2009[1]), there actually is a sensible answer: most physical book sales are on physical stores, so you can't sell to readers unless you first convince bookstores to sell the books. That, in turn, in the U.S. means basically convincing the buyers for the major chains that they should give you shelf space --- there are as many Borders' as all independents put together, and Barnes and Noble is way bigger than that. And the big publishers have built up personal relationships with buyers for the chains, and expertise in catering to their whims. Which can be a big deal --- see [3] for an example of a book series that's being completely repackaged because the buyers couldn't figure out to do with the first cover.
So, it's not like the chains will take anything the big publishers dish out. But the conversation about what physical books get sold in physical stores is largely a conversation between their sales guys and the chain buyers. And the only way for a self-published author to break into that conversation is to somehow sell a few thousand units through some other channel.
On the other hand, if you're willing to forgo the physical stores as a sales channel, which is starting to matter, well... less than it did in 2009, then it really isn't clear that the publishers have much else to offer you. Their other services (editing and packaging) do have value, but not nearly enough to account for their customary share of the gross.
It may be that publishers' problem in the future is going to be justifying themselves to authors --- but I try to read up on this stuff, and I'm not sure I've seen any of them putting it that way to themselves yet.
A couple of references --- Charlie Stross on ebooks
[1] http://www.antipope.org/charlie/blog-static/2010/05/cmap-9-e...
part of a longer series on the publishing industry from a successful author's point of view, as of a year ago:
[2] http://www.antipope.org/charlie/blog-static/2010/04/common-m...
and the blog post on promotion I footnoted above:
[3] http://www.iantregillis.com/index.cfm?blog=164