I don’t think that the new internet business models that remove barriers to publishing and content are necessarily detrimental to the publishing business. The only way internet business models would be detrimental would be if publishers refused to evolve and grow with the times and technology, and refused to reevaluate their own positions in the market.
I don’t know what the exact solution is in order for publishers to stay in the game, but perhaps it is their role in the publishing process that needs to change. Publishers, more often than not, have an extensive network of editors, designers, publicists, etc, that authors could tap into to give their own book the edge over the plethora of books that are being independently produced and designed, for instance by the author themselves. Rather than being gatekeepers, publishers could become a network collective, guiding and assisting people who feel they need the extra assistance.
If I were an average Joe (forgetting all my mPub knowledge), I would feel daunted if I wrote a book and tried to publish myself. As Kitterage stated in their article, “There is a massive oversupply of books, and marketing them to increasingly distracted consumers is an incredibly steep hill to climb.” This is obviously not to say that it can’t be done on one’s own — there are thousands of books on the contrary. But if I want to fight through the crowd to make my way to the front row, I would feel foolish if I didn’t ask for some help along the way. I may still want to be a self-publisher, but I would want to find a someone in a network of marketers that know more than I do and can either guide me in the steps to make myself, or make them for me. Perhaps that’s through sponsorship, but without the help of a publishing house (in the sense of them evolving into a network to assist the public) my book wouldn’t necessarily reach as far as it could.
In order to survive (and have any chance of thriving) publishers will need to reduce their costs so that they can compete with the individuals who are going elsewhere. Perhaps by having pick-and-choose professional service packages, they may be able to better cater to each individual author’s needs, and allow themselves time to reestablish their footing in the publishing game.