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<blockquote>Of course they can: If they sell the e-books at the same cost as Sony's Connect store, Sony gets a cut (along with the publisher, just like any publisher's royalty process). Borders doesn't have to store, shelve or deliver anything, so they make a profit with zero loss from physical expenses.</blockquote>
I don't see this. If they offer up Sony books, they'll have to sell them at the same price as Sony does, the 20% off figure, else they won't be competitive. Conceivably, Sony could agree to apportion Borders some amount of profit but that wouldn't be significant compared to a physical book sale which has a 40% markup. In essence, despite having lower overhead, ebooks could generate only a tiny portion of what a physical book sale represents.
If Borders sold its own format or sold a device that could read existing formats such as MS Lit, Mobi or Ereader, that are not tied to any specific device, then their mark up could still be 40% but it could also have a greater profit margin on that 40% markup.
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