As I understand it, what you seem to blithely call "small industry" is still millions of dollars in gross revenue. But, from what I've gathered from the business types around here, RPGs are not a high-profit margin business, even for WotC. The end result is that we are talking about a significant chunk of change, but WotC is probably not in the position of a really large company, that can afford to be magnanimous.
It is easy to paint WotC as "damned", but I am not convinced things are all that black and white. Sure, WotC doesn't let other companies play in their yard easily and freely. But, as I understand it (and someone can correct me if I'm wrong), there's a flip side - WotC pays better, and to more people, than any other RPG company.
Which is not to say that WotC is sweetness and light, but simply that the ethical position here isn't so clear cut.