Consider that Netflix is making a profit providing hour(s) long HD videos for $8 per month.
Let's assume that Amazon isn't less competent in that area, with their AWS expertise and operating large-scale websites since 1995.
Given than I watch much more than 8 hours of video, it's safe to say that the cost of delivering an hour worth of video is less than $1. In fact, I remember reading (can't find a reference) than it's around 5 cents.
Let's assume that hour of video is 1GB and an eBook is 100kB.
Delivering more than 10 thousand ebooks (which is way more than most everyone will ever buy in their lifetime) probably costs Amazon about 5 cents and certainly well below $1 (even if you choose to nitpick and adjust my numbers).
That means that they need to sell three 99 cent books (at 30% profit) to cover their lifetime costs per customer.
Let's stop this talk about costs of delivering digital goods, and especially ebooks. Ebooks are a fraction of the size of music or video files and people download few ebooks once while they stream audio and video for hours and in case of music repeatedly and radio and video streaming services still manage to make a profit after paying huge royalties.
I could probably personally fund the cost of bandwidth to deliver ebooks for the entire population of the US and still afford a latte.
Delivering the goods is not the only thing that costs them money, and, likely, only a tiny fraction of the costs. Without further arguments one must assume that that DVD more or less has a similar size web page advertising it as a 99c book, that page gets the same number of views for every sale, help desk and accounting costs of a DVD are about equal to those of a 99c ebook, etc.
I do not know how large those costs are, but it might be possible to get an idea from Netflix data, if it is publicly available. How much profit do they make per $8 customer? I bet it isn't $7.95.
Does it make a difference that Amazon delivers e-books over a cellular connection I get for free, while Netflix delivers them over a cable internet connection I pay $100/month for?
I wrote some notes about the economics of delivering ebooks last year at http://lists.canonical.org/pipermail/kragen-tol/2010-October.... The short version is that yes, you can deliver a million ebooks for seven bucks, so you probably could underwrite the cost of everybody downloading ebooks — if they only downloaded the ones they read, at least.
Another important book vs film distinction: digital films/tv shows will increase in quality, so the files will get larger over time. However ebook files are not getting longer, since books (similar to movies) are not getting longer to read/watch. Bandwidth gets cheaper as the years go on.
Let's assume that Amazon isn't less competent in that area, with their AWS expertise and operating large-scale websites since 1995.
Given than I watch much more than 8 hours of video, it's safe to say that the cost of delivering an hour worth of video is less than $1. In fact, I remember reading (can't find a reference) than it's around 5 cents.
Let's assume that hour of video is 1GB and an eBook is 100kB.
Delivering more than 10 thousand ebooks (which is way more than most everyone will ever buy in their lifetime) probably costs Amazon about 5 cents and certainly well below $1 (even if you choose to nitpick and adjust my numbers).
That means that they need to sell three 99 cent books (at 30% profit) to cover their lifetime costs per customer.
Let's stop this talk about costs of delivering digital goods, and especially ebooks. Ebooks are a fraction of the size of music or video files and people download few ebooks once while they stream audio and video for hours and in case of music repeatedly and radio and video streaming services still manage to make a profit after paying huge royalties.
I could probably personally fund the cost of bandwidth to deliver ebooks for the entire population of the US and still afford a latte.