Holloway McCandless asked me in Monday's comments why literary fiction seems stuck on the hardcover-then-paperback model of publishing (which has dominated the trade book scene for the last century) when it seems that issuing these books as trade paper originals might make more sense. The answer: it seems we're moving in the TPO direction, Holloway, but as with everything in this industry, it's going to take a little time.
Ever since books have been—well, books, I guess, rather than scrolls—they have been hard-bound. Hardback books are significantly more durable than their paperback counterparts, meaning they are more often retained in public and private libraries. (This sort of dates back to those magical "book as sacred object" days of yore.) Because the market will support (or, rather, has historically supported) a higher price for these superior quality books, publishers produce (or, rather, have produced) them because they will earn them more money. Fancy McPublisher sells Fancy McBook ($35.00 RP) to House o' Books at a 50% discount ($17.50), House o' Books sells it to you at a 30% discount (off the original $35.00, or $24.50). House o' Books makes $7.00 and Fancy McPublisher makes a profit that varies depending on the print run of the book.
Let's now assume the book in question is a trade paperback original. Because the RP of the book will be lower (almost certainly between $12.00 and $20.00), Fancy McPublisher will make less money per book. While it's true that the costs incurred for a hardcover book are slightly higher than those of a paperback (e.g. printing/paper/binding, shipping, co-op) a lot of the costs are format agnostic (e.g. employee salaries, art, permissions) and so the publisher won't be paying that much less to print trade paperbacks vs. hardcovers. Since costs aren't a lot lower for paperbacks and profits are down, publishers reason (correctly) that they should sell a bunch of hardcovers, earn a higher profit margin on them, and then get a second wave of (smaller) profits a year later when the trade paperback comes out.
They reasoned correctly, that is, until the one-two combination of a recession and a major shift to e-books hit. With consumers now less willing to purchase hardcovers, I believe publishers are now realizing that they can actually increase profits by reducing per-book margin and moving a larger number of units—that is, hypothetically sell 20,000 trade paperback copies at a $0.75/book profit ($15,000) rather than 7,000 hardcovers at $2.00/book profit ($14,000). While steep discounting on hardcovers by retailers like Amazon, Borders, and Barnes & Noble has kept publishers from moving more aggressively toward a TPO-oriented publishing model, the number of incentives are, I think, mounting.