Well, considering D&D has actually published anything new for quite a while, I don't find it amazing that Pathfinder outnumbers D&D at the local B&N. During most of 4e's run, my local B&N had far more 4e stuff than Pathfinder. And the whole reason we have lots of player focused splats is because there are more players than DMs, so selling to all of them is a potential larger market. As I understand it, the old AD&D style modules were either loss leaders or had razor thin profit margins by the time of 3e's release. It was one of the reasons for the original OGL, to offload a lot of the less cost effective adventure writing to smaller players so WOTC could produce glossy, high quality books for players to trick out their PC's with. And the strategy worked, at least initially. Until the Adventure Path model, largely perfected by Piazo, took hold and filled a gap.
But I agree that that business strategy is no longer the way to go: the market is changing and the pendulum is swinging back a little towards adventures and DM focused products. Ryan Dancy's 'network externalities' argument may apply here. However, one has to consider the size of WOTC, and the income & profits needed to sustain them. I doubt if they will allow D&D to ride on Magic's revenue coattails forever. It may be that they need more hardbacks to justify overhead, or they have to reduct size and have more layoffs ( queue evil mean WOTC thread here). DDI subscriptions seem to be one way they have/are trying to offset this cycle of revenue ups and downs, so it seems they are aware of the problem.
