They're not incompatible at all. Libraries aren't given any special provision when it comes to copyright. Physical copies of media are single transferable licenses -- whether it's a book, tape, CD, or DVD. And when libraries buy digital books they negotiate a license with certain number of seats where patrons check out a license when they download a book -- exactly how a lot of commercial software is licensed.
Children's books would not exist with libraries. You'd probably find that without the library most of the deeper catalog for publishers would not be viable.
At risk of "+1, yes, this," I was naively but genuinely surprised at how valuable library sales can be to books when I was researching that a couple years ago. For indie/small press, even a few hundred extra copies sold could be a substantial revenue bump -- and only a small fraction of libraries in the country buying just one copy of a book could do it.
(Also, I'm pretty sure publishers know this, and I don't think anyone of them have made serious arguments against libraries. It's digital media and its zero-cost reproduction that gives everyone fits.)
To pile on — think of the Amazon Kindle business model. You often pay more for instant gratification.
Even for popular books, it drives demand. You can wait 8 weeks to read the latest James Patterson, or buy it now. But would you buy the previous books in the series @ $20/ea?
Are you arguing that authors/editors/etc don't need to feed their families?
Our economic system is fundamentally broken, in that we need to give creators more financial support. Throwing our books into our current Intellectual Property mess isn't going to fix that, just like it hasn't really fixed that for other media for the past 20 years.
We need to bring non-library media closer towards the library model, rather than the reverse.
