The only thing that seems inaccurate about his post is his analysis of PDF sales.
Heck, even with his 5 to 1 rule PAizo is still making as much profit on selling the PDF at $10 as they are selling the print version for $50.00. So a loss leader? I don't think so.
Plus, WOTC and Goodman have both clearly stated that PDF sales are pretty much a meaningless part of their revenue stream. Paizo has even gone so far as to say PDF sales are not exactly significant.
However, he very well may be right about the game market shrinking, I know several publishers (smaller ones) are walking fine lines of survival and closing shop. Since they are publishers I like I hope their doors stay open.
Will it crash and burn into oblivion? No, I don't think so, but I don't think that is what James was saying either. It is walking the line between being the way it is and radical change, and I think the change is inevitable.
Getting back to PDF's, their sales suck for one simple reason, most of us consumers know they are far, far cheaper to produce and distribute than print books, so we simply refuse to pay such over inflated pricing for them. Simple as that. I know the book industry would love to make the ugly profit margins Microsoft and the video game industry makes on their video games, but books are not video games or software programs. So its not going to happen unless consumers become much less savvy. So if the book market wants PDF sales to explode, then they better slash their pricing to a reasonable profit margin, instead of price gouging us like the video game industry does.
So if a book company makes $10 per book in the print trade then that should be the PDF price. Not an inflated profit margin by acting like we are being given a deal over print versions by pricing PDF's at 60% of retail. We are not, we are being price gouged.
That is where I think Paizo is going down the right path. They know they only will make about $10 per print book sold through distribution, considerably more from books they sell directly through their subscriptions and website sales.
So selling the PDF for $10 is simply fair pricing, not a "loss leader". A fair price I think Paizo is going to reap rewards from. I know at least 6 people who had no interest in PF, but since I told them about the $10 PDF price point, they have since said they will now check PF out when it is released. Wy? Because the PDF price was such a reasonable one. IE not the over inflated price we see with too many companies. One of which is PAizo, with the prices they sell most of their PDF's at.