Still, even if tpeple by one setting and stick to it, had TSR controlled their print runs better, I don't see why that should be a problem? You have a smaller initial print runs and base supplements and print runs on the sales numbers for each setting while putting out some general material as well.
First of all, I wasn't speaking specifically about settings so much as the glut of crap products in general. But, since you brought it up-
Because it costs just as much money to produce a quality setting product even if only 1/2 or 1/3 or 1/10 of your customer base buys it.
Basically, in any kind of production business (including printing and bookmaking), there is an economy of scale. You want to print one copy of a book, it might run you $75. You want to print 100 copies, they might each run you $20. You want to print 10,000 copies, and you might pay $3 each. And I'm not talking about the cost of developing, playtesting or anything other than the printing and binding.
If it costs $25000 to develop a setting product (I made that number up, I have no idea but I'd bet my guess is way on the low end) and you have to pay $20 each to produce them and you sell them for $40, you need to sell 1250 copies to break even on development and printing costs. If you are producing four settings, you need to sell 1250 each to break even on each one. If one flops... that's $25K (or whatever) down the tubes.
Then look at stuff like shipping to stores, overhead of the office, etc....
All that said, how many people bought Council of Wyrms? Jakandor? The Rome supplement? How many products did TSR produce that it had to 'make up' for the cost of creating with other products, especially during the years when they kept churning out crappier and crappier stuff and product after product aimed squarely at a subset of a subset of an already-small customer base?
"If you play Forgotten Realms in this ONE TINY CORNER, you MUST HAVE this product!"
Great, except that product cost money to produce outside of all proportion to the income it generated. And of the 150 guys playing in that one tiny corner of the world, only 30 are going to buy it.