A lower price for an ebook is not proof, or even an indication, of price fixing. If an ebook costs more than the physical book it need mean only that people who read ebooks are willing to pay more. People with ebook readers are probably more affluent and more appreciative of convenience and/or technology, and therefore willing to pay more. Publishers and retailers have every right to charge what the market will bear for a product. If the ebook version of Dune is worth the $3 difference to you, buy it. If not, buy the physical book. Or just check out either the ebook or physical book from your local library for free! But either way you are not getting screwed, you are making a value decision. And if no one wants to pay $3 extra for the ebook, then the publisher can decide to drop the price.

The margin numbers I give are on the whole company. Amazon does not break out the ebooks separately, but the vast majority of its businesses are not on the agency model, so 2012 is applicable. And I'd also point out these articles point out the problem with following percentage numbers which headline all the articles you quote. So Amazon profits climbed 71% in a 2010 quarter: they went from 225 to 384 million. On the other hand Apple's last profit was only up 51%, from 6 billion to 11.6 billion. Amazon was better by 20%. Yea, except Apple made an additional $5.6 billion vs. Amazon's increase of $157 million. When a company operates close to break-even, small actual gains result in large percentage gains. My point is you need to read carefully, even between the lines, and think about what the numbers they choose to give actually say. Read an Apple earning statement- they push the profit. Amazon pushes the revenue. That's why I own Apple stock and not Amazon stock.

Ooops- as soon as I hit submit I realized that in my bookselling example the initial gross margin is 50%, not 100%.

I am not making it up. Look closely at the statement amounts for the last quarter. Amazon only states they are making a ton of _revenue_ off the Kindle, not a ton of profit; they do not break out the numbers to pinpoint where their meager profit comes from. Search the web for sites that give estimates of what the Kindle costs to make vs. what they sell it for and make your own decision. The actual numbers are not reported, so the estimates are the best you can do. But something that cannot be hidden is the actual margin for the company. See the NYT discussion of Amazons last quarter:

http://www.nytimes.com/2012/04/27/technology/amazon-profit-dropped-35-percent.html

The article brags about the GROSS margin (profit minus cost of goods which is 24%) but the net margin is their take-home pay. (You can tell if a site is pro or con Amazon by which they report.) To explain the difference, imagine that for $20 including shipping I sell you a book I bought for $10, and it costs me $10 to ship it. My gross margin is 100%, but my net margin is 0%. Amazon's net margin is the total cost of their doing business, including web infrastructure, salaries, real estate taxes, shipping, and everything else that actually costs them money. Amazon's net margin is 130 million profit/13.18 billion revenue or 1.01%! By comparison, Apple's last quarter numbers were 47.4% gross margin and 28.3% net margin.

The books were cheap because Amazon was selling them at a loss to prevent the entry of competition. Amazon has a long-term strategy to work on razor-thin margins driving out all competition. In the last quarter they made about 1% of gross- they made a penny out of every dollar people spent. No small or medium business in their right mind would enter a market like that. So overall Amazon does not turn a lot of profit, but their stock is valuable (much more than their profit would justify) because investors expect that once they have completed driving all their competitors out of business they will raise their margin (meaning the prices you pay go up). So you are going to pay more, a little bit now because of the agency model and most favored nation status thanks to Apple, or a lot more later when no one but Amazon has physical or electronic books to sell you.

You have met one now. I have a second gen Kindle, the Kindle fire, and iPads 1 and 3. Forget the Fire - all I read on there is my monthly free book from Amazon Prime. Before the iPad 3 came out, I used the old Kindle regularly, essentially any time there was enough ambient light. I refuse to have a little Kindle light or headlamp to read! I used the first gen iPad to read when it was dark. The new iPad changes that. Its retina display is tough to live without once you have used it. And its backlight produces more than enough light for reading during the day. Only in direct sunlight is there now a problem. So if I'm going to the beach I take the old Kindle, otherwise it is the iPad 3 by a mile.

we'll never know because neither Apple or Amazon break them out of earnings. But there is an essential difference. Apple sells music, movies, and books to get you to buy their hardware which makes them huge money. Amazon is selling their hardware at or below cost, and their books at or below cost. They do this in the hope of gaining market share, and between the lower prices because they lose money and because they were there first, they certainly have an edge. But my point is this has to come to and end soon. If the anti-trust case does not get Apple out of the ebook business (and it won't) Amazon will raise prices.

Apple will not be toast.

Worst case they pay a small (for them) fine without admitting wrongdoing, and promise never to do it again. What happens then?

Well, Apple can sell their books at cost or below because their profit comes from hardware. The iTunes store is a tiny blip in Apple's revenue, and ebooks a small part of that tiny bit. The publishers can raise the price Apple, Amazon, and others pay for ebooks, and will to preserve their income. Amazon gives away their hardware at cost, so somewhere they need to start making profit on media. It is widely believed that Amazon is selling many books below publisher's cost in order to drive others out of the business. Once it is clear that Apple can (and will because they have lost the agency model) match Amazon's prices and is in the ebook business to stay, Amazon won't be so anxious to lose money. Then prices will come back to where they have been, maybe even higher.

Apple still breaks records every quarter, Amazon chugs along on its slow growth curve, the publishers keep making some money, and 99% of authors still starve. Nothing's going to change.