Companies that are basically one dude with some desktop publishing software working out of his basement, or who only do PDFs, or who can't get the interest and attention of honest-to-god hobby distributors like Alliance or ACD are completely screwed out of participation in the "industry," and frankly aren't really a part of it.
You would actually be surprised at this being the status of other publishers. Many of the so-called "big names" are like this. The other "dudes" are freelancers.
A lot of them don't admit this, but I found out a few you'd think are "big names" could fall into jepoardy if something happened. About the only person I see admitting this publicly is Clark Peterson of Necromancer games. There are several shops out there who would be in trouble if something happened to their spouse or day-job.
It's hard to see that with the authority being a publisher can do. All you have to do is have a good website and use official language such as the public "we" and you're a professional.
You would have to ask publishers this list of questions to find out.
* Do you work on the publishing full-time without doing any other work, or do you have a second job to supplement your income, or numerous freelance gigs inside or outside of writing not related to your publishing career?
* Are you married or living with somebody? Does your spouse work? Does your spouse make more than you? Do you have kids?
* Are you retired, on disability, or getting any other government assistance to supplement your income?
* Did you win the lottery or have any other windfalls of income?
* Are you living with family members?
* Are you making a living wage? Or are you suffering for your art?
Assuming they would answer these questions, since in some aspects it's not our business, but let's say somebody was willing to take the test. My bet would be many would not be able to answer all of the first five with "no".
It would be tough to guess. I know WoTC and White Wolf have full-time staff. I suspect Paizo has enough money for a staff, and Steve Jackson Games. I remember finding out from Gary Gygax that his publisher partners (TLG and Inner City Games) were partially funded by spouses--in other words, key people can work full time because their spouse makes enough "real world" money so salary isn't an issue.
We know Clark Peterson of Necromancer isn't depending on his stuff for his income. I'd suspect people like Mishler and GMS couldn't pass the "5 nos" test, as well as many people who are publishers here in the publishing forum. It makes me wonder what places like Green Ronin are like.
PDFs, regardless of price, are no more a "loss leader" for the print version of a game product than an iTunes download, vinyl or cassette album is a "loss leader" for the CD.
I know when I used the term loss leader I meant comparing PDFs to other PDFs. While James also mentioned cannibalization, I think he had a key point, that a $10 PDF of as high quality as Pathfinder can make it look to the public that PDFs are overpriced. And he did make good points into the fixed costs of publishing. There are some good points he did make, even if all of them aren't as solid as I once thought.