I don't know too much abou the business side of the gaming industry... but what else can they do but make a pact with the devil?
Shareware games in the late 80s and early 90s looked like that shareware may have been a viable distribution channel... Apogee games and id's Doom certainly led the way. I recalll a game named Abuse which looked to have a lot going for it. I believe a distributor picked it up after its shareware release but it didn't do much.
I guess without retail distribution, development houses can't survive. Gone are the days of single-guy outfits cranking out innovative and fun games.
The costs and time to bring a game to market have really killed the small companies. I do miss the days of the 90's back when you could have a dozen people churn out a game like Wolfenstein 3D or Doom. Still, even back then there were large budget games. I recall hearing that Sierra's King's Quest VI ran in a million plus budget.