A couple of e-booksellers dominate the field and they have forced unsustainable discounts on publishers. The e-booksellers then engage in a ruthless price war that shrinks the pie further. Publishers are decimated by the low price points and many are forced out of business.
The industry moves to a freelance model where authors have to contract with editors and designers for services, and authors are forced to deal directly with the e-booksellers in order to find publication.
A handful of megabestsellers are able to dictate terms with the threat of negotiating exclusive deals with one of the major e-booksellers, but otherwise everyone else gets very little. A few agencies survive to handle the negotiations for the megabestellers and their subrights.
THE (MOST DEPRESSING) END