There seems to be a common refrain in many discussions of e-books, the idea that publishers should charge next to nothing for e-books because it doesn’t cost publishers much to produce them. This reflects a lack of understanding of a publisher’s costs. The cost of manufacturing a book is only the final cost in an extensive process. Whether a book is printed on paper and bound or formatted for download as an e-book, publishers still have all the costs leading up to that stage. We still pay for the author advance, the editing, the copyediting, the proofreading, the cover and interior design, the illustrations, the sales kit, the marketing efforts, the publicity, and the staff that needs to coordinate all of the details that make books possible in these stages. The costs are primarily in these previous stages; the difference between physical and electronic production is minimal.
Image Source: Steve Wampler