Clearly, something is wrong.
But what can they do to fix it? I say, change their way of thinking. Some things would be hard to change, like changing the return policies for bookstores. It would require an industry-wide change in policies that isn't likely to happen any time soon. But other things could be implemented right now without difficulty.
Instead of seeing self-publishing authors as the enemy, see them as doing work for them. After all, much of the losses with publishing companies are from funding losing ventures. How about only funding the winners? After all, with self-publishing, we can easily sift the winners from the losers. Who's a safe bet? How bout that author that just hit the #1 bestseller on Amazon for 2012. Publishers could eliminate the gamble in publishing, lowering the risk and increasing the return.
This would mean eliminating what is getting to be an increasing rare beast to begin with - new and mid-tier authors at major publishing houses. But, honestly, these individuals could do better by other means anyway. They have the resources. They are probably expected to do a lot of self-promotion anyway. They'd be making better profit margins on their own. After all, some of them already have a fan base.
But how to recruit these Indie-authors away from their current avenues of publishing? Well, there are some things money just can't buy. One of those is time. Take an author that has already made it and give them the freedom to do what they love - write. Offer to manage the promotion, marketing, and et cetera. Offer them royalties that, while maybe not as good as what they currently make, aren't that far off. Hell, offer decent health insurance and I'm sure a few would jump at the chance.
The publishing industry is changing. A few years ago, I saw publishing a novel, becoming an author, as a pipe dream that had no chance of coming true. It was the reason I got into science. I wanted to be an author. Being a scientist would keep the lights on. I never expected to be published and saw self-publishing as means for people to pad their own egos. Now, I see having a published novel as something not in the realm of impossibilities but a possibility, even an inevitability. It will happen. It's just a matter of how successful I'll be.