I think I know how you must feel. I used to work for economists and they would call this state of affairs, "restructuring".
The competition, which you and others are experiencing, that of part-timers willing to sell their photos for low amounts, was always theoretically there. But access to easily digitized photos, either scanned or shot with digicams, and access to web selling sites makes it almost trivially easy for them (me?) to get access to image-buyers.
I am no expert, in fact, given my level of photographic expertise, you could say that, rounded down, I know nothing. But, using an example that I have used before, on a thread here I think, if a tourist pamphlet publisher needs a 1.5 inch square photo of a rustic barn to decorate a brochure they are printing, buying a high-rez, high-priced photo makes no sense. His nephew could take the picture he needs with a 2 mpix digicam. Or he could buy one from me for $1 on a micro-payment site. And he would not necessarily be giving anything up in terms of quality.
If established photographers used to get that business at $50 a photo (making that number up, btw) and now they don't get it anymore, that is not a different situation than in any other business. People used to make shirts in North America but now they buy them at discount stores for $5, because someone, somewhere in the world is willing to sow a shirt for pocket change.
I wrote software for a living for 25 years and spent the last 3 years unemployed. I am completely mysitifed by people who write software and give it away, as if they were on some kind of altruistic mission from god. Can you imagine machinists building cars for free? When is the last time your mechanic fixed your engine for the price of shareware? Yet, in software, it happens. I never thought of computers and programming as anything other than a professional service provided to others in exchange for money. But some people think it's religion. Go figure.
The upside is that most people are not nuts and will eventually stop doing things that do them no good. Low-rez micro-payment work is a volume business. You need lots of photos selling for low amounts to make real money. For some that model will work. It won't take away business from photographers doing custom work, although it might have the effect of decreasing the value of what they do. There are a lot of people in a lot of industries in that boat. We all expect to buy digicams, inkjets, computers at rock bottom prices from high-volume web-based superstores because we don't want to spend much. Everyone else feels the same and some of them feel the same about photographs.
If people start uploading 48 mpix photos to sites to sell for $5, royalty-free, then the sky might truly be falling. I can't imagine why anyone would do that. I don't mind selling low-rez shots for $1, but I would not submit anything of higher resolution than that to micro-payment sites because I think that's ridiculous. But I think it's nuts to spend hours writing and debugging software to then give away, but there are people who do that.
The other side of the coin is that what might happen to a lot of folks is that once they see that they CAN sell their 4 mpix photos for a $1, they will automatically start to think in terms of increasing their margins. That is a natural thing for sane humans to do. Then they end up having to buy better equipment, learn new techniques, look for different markets, in other words, build a business. At that point, priorities change.