If WotC released more books with options for players they would sell more books.
Right, they'd sell more supplements, which would have a diminishing return on revenue but a linear increase in production costs.
With the current strategy, they're selling more
PHBs which have a fixed minimal production cost because it's already written.
And there's evidence that too many supplements drives away new players -- players who they need to buy those PHBs. Basically, increasing supplement production would cannibalize PHB sales. Wizards would be spending money to write books that take away sales of books that are already written.
This is how we wound up with 3.5: Wizards needed to prompt all the current players to go out and re-purchase the PHB/DMG/MM only 3 years after release. Now, instead of 5.5, Wizards puts out Xanathar's (which is kind of like 5.5) and all the current players go out and buy it. The big difference is that 5E core is still intact so it's much less likely to fracture the player base or undermine the existing third-party supplement market. This keeps new player growth healthy, which keeps PHB sales up.
Wizards has always been a PHB company. Supplements were always seen as just a marketing plan to sell PHBs. This was the driving force behind the OGL and the d20 license: a way to allow third-party publishers to bear the cost of this marketing material. Now, because of live streaming and Adventurer's League, there's not as much pressure on current players to rope in new players. So Wizards doesn't need to spend as much pleasing current players with supplements, and can afford to make the game itself welcoming to new players, who will buy the PHBs.