The submission process can be complex and confusing. Lots of publishers have very specific requirements and it can be hard to find a publisher that is right for your book. So if you've found the perfect publisher, it can be hard to understand why they would reject your manuscript based solely on a word count. It seems like a pretty superficial thing.
But when a publisher choses to invest in a manuscript, a word count is an important consideration from a business standpoint.
A publishing house is a business. Don't get me wrong. No one gets into publishing unless they love books. It's not a place to get rich quick. It's an industry full of people who are passionate about the power of the written word. But that doesn't mean publishers can afford to run an unprofitable business. If they lose all of their money, how are they going to make more books?
There are a lot of ways that a word count can effect the estimated costs and revenues of a book.
Starting off simple, the number of words is the biggest (but not the only) factor in determining the page count of the final printed book. The more paper and ink, the more it will cost to print the book. And the more paper, the heavier the book and so the more it will cost to ship that book from place to place.
The number of words will also be a major determining factor in how much time an editor needs to work on the manuscript. In general, the longer the book, the more time an editor needs to read through it. As they read a longer book, odds are they will find more problems that need to be fixed or talked over with the author. And for every change, it can take longer to make the rest of the book consistent with the new edits. These additional factors often add together to make a long book take proportionally more time to edit than a short one.
Additionally, some readers are scared off by long books. An 1,000 page book is a much bigger time commitment than a 200 page one. Some readers will take the time to read epic fantasy novels, but others want short books that they can easily fit into their daily lives. Even in digital publishing, the length of the book may be less obvious to the readers, but it is still a factor in the audience's needs and expectations.
You may be thinking that this means that the shortest manuscript is the best financial decision, but that is not the case.
There are some parts of the publishing process where the costs won't be effected by the word count, such as the cover art and ad spending. No matter the length of the finished book, these things will need to be done in order to get your book out into the world. To cover those fixed costs, publishers need to be able to charge a certain minimum amount per copy.
But readers are not interested in how much the book costs to make. To them, the book's value is based on other factors. Booksellers record data on what prices their customers are comfortable spending for different age ranges and formats. They've found the point where readers don't want to spend their money on a book because it feels too short. On the other hand, a book that is too expensive may not sell fast enough to be worth the shelf space at a store. Therefore there are a limited number of lengths that books can be in order to sell at profitable prices for publishers.
An unprofitable book will be frustrating for everyone. Under certain circumstances, it is more profitable for the publisher to destroy copies of their books or to give them away for free than it is for them to sell the books to a paying customer. These destroyed or free books generally mean no royalties for the author.
The actual word count requirements may vary from publisher to publisher based on their specific connections and financial structure. A publisher that can expect to sell 10,000 copies may be able to keep costs low for stores and customers by printing and shipping in bulk. A publisher that deals in epic fantasy may have readers that are specifically looking for those massive page counts. A publisher that deals with lots of shipments to Australia might be very concerned about keeping of the weight of their finished books down.
So when a publisher rejects your manuscript due to the word count, it's because they cannot make money on it. Whether it is the readers, the bookstores, the fixed costs, or the printers that are setting the limitations, the word count is a major factor in how much money a publisher can make per copy. So if you want to find a publisher that is motivated to sell as many of your books as possible (and to pay you good royalties for them), make sure to check the word count requirements before submitting your manuscript to any publisher or agent.