1. Traditional publishers have all the connections. They control the bookshops, the media, the reviewers (try to get your book looked at by a newspaper or literary magazine) the airport sellers, the major literary prizes, the media, the pr and pipelines to international markets that provide translations to other languages and bonuses like movie rights.

2. A large part of the online publishing problem is self-inflicted. There is, without doubt, some great literature being produced via online publishing. It is a gateway for many very talented people. Unfortunately the very thing that makes it easier for writers to publish their book means that ‘anybody’ can publish a book. And they have! So the very good and great books are overwhelmed and buried in an endless outpouring of mediocre to dreadful writing all screaming for the public’s attention. it’s a vast sea of books pouring out every day. With traditional publishers maintaining a fortress mentality to stifle any chance of online books being seen or noticed.

3. Even traditional publishing has changed dramatically. These publishers no longer produce books, they produce ‘products’. Books are see as a package to be mass-marketed. There’s a lot less room for quality writing and more emphasis on personality, fame, blockbusters, gimmicks and media marketing tie-ups. Many authors linked to traditional publishers have been reduced to having their names in 300pt type on the cover of endless books in which they provide only the story outline to the ghost writers. It’s sausage factory literature and it makes lots of money.

4. Then there’s the ‘elephant in the room’. The subject nobody mentions. Publishing is run by females! No this not some mysogonistic rant. Women buy a lot more books than men. So the whole publishing world is geared toward providing endless female orientated books, written by women and about women. Check literary prizes in most countries and you’ll find the winners are women and the judges are women. Check the editors, assessors and other personnel who make the publishing decisions in all the traditional publishing houses and you’ll find they’re all woman. It’s simple maths. The companies want to make money, lots of it, so they chase the market.
This is great news if you’re a female. Not so great if you were born a male.

5. It’s a lottery. J K Rowling is a shining example of literary success but let’s be honest. She could just as easily have continued to receive rejection slips until she gave up. A matter of being in the right place at the right time and the marketing took off. Plenty of other books receive similar treatment and the marketing fails. Sometimes great books receive the credit they deserve. Other times they are ignored while some dreadful trash grabs the public’s imagination.

6. There’s still a lot of cheating going on. Example – Creative writing courses are everywhere. “Take My Course For Instant Success”, “The Key To Becoming A Best-Selling Author,” and so on. One thing nearly all these courses do is teach students ways to manipulate the market by all posting 5-star reviews for each other on Amazon. A dozen good reviews can be the difference between getting some impetus or sinking without a trace.
There are other systems that produce similar results. Real reviews by real readers are harder to come by.

7. Finally. Not all readers want to read deep, involved, clever writing so the great majority of book sales, traditional or online will continue to be light, mass-market stuff.
Personally, I have put a number of books out through Kindle and POD. I’m quite pleased with them. I think they’re well written. The results have been pretty ordinary. I tell myself that it’s because nobody knows they exist. While I keep on trying to find legitimate ways to get them noticed I have decided that it is not something to get depressed about. I’ll keep on writing because I always have and I enjoy it. In the end I will have the books I’ve written on my bookshelf and at least some people round the world will have read and enjoyed them. Who knows, maybe one day they will suddenly take off.

I’ve been self-publishing for about 18 months, after a less than ideal experience with a publisher and sold almost 15,000 books. People might think self-publishing is ‘lesser’ than trad, but I’d like to see how many books they’d realise by sight were self-published if they just picked them up off the shelf or found them browsing on Amazon these days. Like you say, I think they’d find a lot of the ones they chose weren’t actually ‘real’ books after all.

Which is not to even mention the fact that publishing started with a model that was much more like vanity publishing; I always say, if self-publishing was good enough for Jane Austen, then it’s good enough for me!

Just want to add that I recently read on an elite literary organization’s website that they had opened their review pipeline to self-published books because…several blockbuster authors had cut to the chase and self-published some works. It no longer made sense to the organization to exclude the category of “self-published books” when traditionally pub’d authors were hanging around in that same category, enjoying the lack of barriers to getting the final product to market and the better royalties. (How many times have we heard of a trad pub’d author not being able to get the next book acquired for publication? They realized self-published authors, ironically, didn’t lose time being told no and joined the self-pub party.)

Final thought: I have noticed even over the past three years that the services for self-published authors have broadened. It’s becoming quite easy to find excellent cover designers, editors, epub file creators, etc. Self-publishers have learned some tough lessons about shortcuts and industries have answered the call of self-pub’d authors who have, collectively, upped their game. As you note in your post, the final products really are often indistinguishable.