This has to be the reason. It seems like it would be a no brainer to offer a premium service UNLESS it cannibalized their VASTLY more expensive premium services. No business is going to pay 5x for all of their employees' tickets when a reasonable option exists for only 50% more, and it might hurt frequent flier programs because people are less concerned with competing for status when you can just buy a premium seat from anyone for a reasonable cost.

If it was just about the extra space over a normal coach seat, the premium would only be 10-20% for a much larger seat.