This is quite true. I would only add that there are a growing number of so-called 'cross-over' titles that don't fall neatly into either the old 'literary fiction'/'commercial fiction' pigeon-holes. Everyone agrees that Tom Clancy and Danielle Steele write commercial fiction, and that John Updike and Saul Bellow write literary fiction; but between those clear poles there is a vast swathe of territory that could be seen as either literary or commercial, depending on your criteria. Of course, the intelligent answer is not to pigeonhole books at all, which, I'm glad to say, bookshops increasingly do not. These days you will often find 'chic lit' nestling on a table next to the latest offering from Philip Roth. And why not? A glance at page 1 of either title will make the difference pretty clear.
In my personal experience a novel is described as 'literary' by publishers who want to buy it (i.e. cheap, because, being literary, it cannot expect a big audience); and subsequently 'commercial' when those same publishers are trying to sell the book to retailers (i.e. it is clearly going to have mass appeal so they should stock it in large numbers).
In spite of this, I know of many books that have failed to find publishers because they were described as 'falling between two stools'. This drives authors wild, because they know that there is a big market out there for books that combine pageturning qualities with substance (political, philosophical, historical, journalistic whatever). But in reality, while the 'two stools' argument is palpable bunk, I have come to the conclusion that it is often wheeled out as a more polite way of saying 'this book is not badly written, but it did not engage me on any level.'
