"Imagine a world without Publishers, where the folks working at the studio still get paid for the work they do"
Someone has to put down the money upfront.
There may be two years worth of development before the game goes to market, thats two years of wages, rent, PC's, electricity, insurance. Then you have to put down more money for the production of physical media, even at $2 per DVD+Case+Manual its big money to lay down. There is also the legal minefield with various game mechanics patented, hand over more cash for legal experts to evaluate. Then pay for your game to be classified in a bunch of countries, who all want you to pay their fee before being allowed to distribute within the country.
Marketing makes a big difference, stands at E3 aren't free, many publications will only run your "sneak peaks" for payment, games shops will only display your posters and give the premium shelf space for payment.
All that has be paid for before you start seeing any return, where does that money come from? Dont expect a bank to just swing your game studio a few million worth of loans.
Return on investment is not a guaranteed thing, plenty of games fail to break even.
Its often the publishers paying all these upfront costs with advances to the games studio.