Very true. And it's highly unlikely that another distribution channel could come along and convince the same publisher to sell the ebooks to them at a lower price, so they could compete with Amazon without selling below cost.

It seems a lot of people are fixated on the idea that digital goods have no cost, which is simply untrue. Even discounting the fact that the seller has to purchase the item from the publisher (under the traditional model), there's still a base cost associated with the good because of licensing issues. People need to get paid, and certainly some people do get paid on a royalty basis. As a trivial example, someone needs to pay the author, which is typically done through royalties. But the publisher also needs to get paid, as does anyone the publisher employs.

If you're self-publishing and selling on your own storefront, then no there's probably no marginal cost as you don't have any sort of license or royalty agreements with yourself. But as soon as multiple parties are involved, things change.

"As a trivial example, someone needs to pay the author, which is typically done through royalties. But the publisher also needs to get paid, as does anyone the publisher employs."

Those aren't marginal costs.

Any time someone is paid based on the number of units sold (e.g. royalties), sure it is. If I sell one more ebook, I need to pay out more royalties, and therefore my total cost has gone up.

I realize I'm handwaving a bit, but my basic point is that selling more ebooks is not free for the publisher. There's definitely a cost here. And it's somewhat tangential anyway, because the marginal cost that's important here is Amazon's. In the traditional model they buy ebooks from the publisher at a fixed price, just like with physical books, and then mark them up and resell them. So the marginal cost here is the amount they pay the publisher per copy.