Typically not large royalties, but they are collecting them.
Yeah that behaviour is detestable. Absolutely utterly unethical and everyone who engages in this type of behaviour should take a long look in the mirror and realize that there's an Evil person looking back.
I've lost so much money to f*ckers like this and I have no recourse, it makes me so mad I can spit.
They could make a ton of money doing it this way: Physics textbooks can sell for hundreds. But many don't.
Using your own book for a course(separate from the money) has its benefits: The book has exactly the content that you want to teach off of, and you can also choose good problems.
When I took a Differential Geometry course in college, the professor had a translated version of some paper from a Russian mathematician back in the 1950s that he taught off of. It was cheaper to get copies from Kinko's, and it's not like the math changes. The old pioneers can sometimes give better intuition too.
It will also push companies to keep research more private and proprietary. Why would I spend millions of dollars on research, only to have it freely distributed to everyone, including my potential competitors?
I've never witnesses a time where more people fight to give up more and more of their own power and hand it over to governments and large corporations on a silver platter...and then complain when it's all gone.