There's an interesting discussion on Lee Goldberg's blog in the comments of a post he did on self-publishing. I wouldn't generally recommend self-publishing, especially if you write romance, because there are lots of options besides New York out there. I did read one self-published romance that I thought was quite good, but that seems to be the exception rather than the rule. However, some of what's being said on Goldberg's blog could apply to e-publishing, too.
Jim Michael Hanson says in response to something Lee wrote, "One of the falicies (sic) of your arguments is that NY buys everything that is good and throws out the rest. The reality is that there are literally thousands of extremely good MSs presented to NY every year backed by hundreds of very reputable literary agents. The NY presses can print only so many books and choose what they think are the best. The end result is that literally thousands of very good books are not picked up."
Similarly, J.A. Konrath wrote, "I'd love to believe that NY publishing always picks winners, and never makes mistakes, and if a manuscript is good enough it will always find a home. But that isn't true. While the majority of the good stuff finds a home, and the majority of bad stuff gets rejected, there are some good things that don't sell, and some bad things that do."
This is true for e-publishing and small press books, too. All authors strive to write well, but there is no such thing as "New York quality writing," a particular level at which your writing will absolutely be guaranteed to sell to a New York publisher. My first romance, The Light in the Darkness, was rejected by nine New York publishers but purchased by the tenth. Did it seem up to New York standards to one editor but not to others? Who knows? There are numerous factors that go into a publisher's decision to buy a book, and writing quality is only one of those factors.
My second romance, Love Remembered, was rejected by the same publisher, and several others. Did I suddenly lose the ability to write to New York standards between my first and second books? I don't think so (although I am naturally a bit biased:-). There are lots of good authors out there, and just because an author isn't writing for New York doesn't mean her work is inferior. I just wasn't writing in a historical setting that worked for New York publishers.
Similarly, there are a lot of previously e-published authors whose e-pubbed books are now being reprinted by New York publishers-- I believe MaryJanice Davidson's Really Unusual Bad Boys is a reissue of three EC stories, and the same appears to be true for Angela Knight's Mercenaries. Linnea Sinclair's e-pubbed novels are now being released by Bantam Spectra. These ladies all write very well, and apparently wrote to "New York standards" even before they were published by New York publishers.
My point? I'm not sure I have one *wry grin*. I'm just saying that some very good romances aren't picked up by New York for various reasons, whether they're rejected for setting, heat level, subgenre, or something else. It's nice that e-publishing has evolved to catch some of the books that fall through the cracks.