My first thought upon hearing that Bell Labs was quitting basic physics research in favor of market-driven development was, Didn't they do that a while ago?

The answer is: pretty much. This is the formal end, but it's been coming for some time.

This article is from 1996:

When Greg Blonder joined Bell Laboratories in 1982 as a physicist just out of Harvard, no one said a word about products or selling...But now Blonder, whose two young sons often ask him where they can buy something he has invented, is making a transition from basic to more applied research characteristic of industry everywhere in America [...] emerging as the improbable chief of "Customer Expectations Research," a novel undertaking for the august Bell Labs based in this suburb 30 miles west of New York...

Corporations once spent big sums on basic research...In the 1990s, though, corporate outlays for research and development have fallen significantly for the first time, with much of the decline coming out of basic research. The shift in emphasis to near-term development is paying off today as American companies excel at turning a generation of good ideas into profitable products.

Bell Labs reportedly had only four scientists working on basic research as of July.

It leaves behind quite a legacy.

While the changes at Bell Labs signal the end of an era, this article says fundamental research by companies like HP, Microsoft, and IBM is still a big deal.

An interesting discussion on science, technology, and global competition in the comments at Slashdot.