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I don't think you've calculated this in the way it works when publishers set a price. You're working backwards taking money off the amount earned by Waterstones when it goes the other way around. If it works the way it does on Amazon it goes like this. The publisher sets a minimum price they need in order to divide the income 50/50 with the author, as ebook royalties should be 50% as recommended by the Society of authors. Imagine the publisher feels the author should get about £1 royalty for a book, so that puts it at £2 as a starting price if it's divided 50/50 with the publisher. Then the seller (Amazon or Waterstones) add their mark-up. So you would add 30% to that. Then you add VAT which has been 20% recently. And that's your final price. Waterstones and Amazon always get their 30% mark-up. You don't take amounts off that to get the low figure you arrived at. This does lead to the kind of pricing for an ebook you've mentioned. Publishers find it hard to charge less than about £5 while paying authors a reasonable royalty per book. The booksellers never lose their full 30% mark-up. It may surprise you to know they have some additional clauses in their agreement with publishers. At times Amazon charges a 65% mark-up and only gives the publisher 35% to share with the author - an incredibly low royalty. Their reason for this is if the book is sold in certain countries - but they're just downloads so why should this make a difference? They also give themselves the right to lower the percentage paid to the publisher if they see a more competitive price for the book. It's not publishers killing ebooks. We really need this market to expand. But the online sellers have us tightly in their grasp and we have to agree to their conditions.
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