Offset printing doesn't necessarily give better results than an inkjet/laser printer. My cheap laser printer from Costco produces much better output than most newspapers, and slightly better output than most old paperbacks. Fancy magazines are also printed using offset lithography and they do indeed have better print quality than my cheap old printer, but if I bought a better printer, then they'd be tied on quality again.
> It needs large economies of scale to be financially viable
Yes, but it needs much fewer copies than you'd expect. I help publish a small magazine [0], and we print it using offset lithography. We print roughly 700 copies of each issue, 3 issues a year, and 100 pages per issue. When I priced it out a couple years ago, offset printing was still cheaper than print-on-demand as long as we were printing at least ~200 copies.
Now, 200 copies is still quite a lot, but it's small enough that nearly every non-vanity-published book should have no problem selling that many copies. My impression is that the move to POD is not to reduce printing costs, but to reduce warehousing costs and the risk of overproduction. This is mostly a non-issue for us, since all the subscribers pre-pay for the whole year upfront and we mail the copies as soon as they're printed, but is much more of an issue for books where some unknown number of people will buy copies over some unknown amount of time.
The other big advantage of POD is that you can print it close to where the buyer lives. For the magazine that I help with, the cost of printing is almost a rounding error compared to the cost of international shipping, so it wouldn't surprise me if this is a major motivator for the big publishers too.
> Separately, paper quality has gone down industry-wide. Paper mills are simply choosing to focus on higher volume papers like those used in cardboard instead of producing fine paper.
Ah, that is not something that I was aware of, but now that you mention it, it does seem to match my impressions.