[sirbruce]

You're leaving out the cost of distribution as well. For a typical $10 paperback:

Retailer: $4.50
Wholesaler: $0.50
Publisher: $4.50
- Printing Costs: $1.50
- Distribution Costs: $1.00
- Overhead Costs: $1.00
- Editing Costs: $0.50
- Profit: $0.50
Author: $0.50

Now, ebooks eliminate printing, distribution, and wholesaler costs. A $3 ebook would leave $1.50 in costs to the publisher, $0.50 profit for the publishers, $0.50 for the author, and $0.50 for the retailer. Now, $0.50 ain't much for a retailer, but it's far cheaper for them to run the machines to distribute ebooks via websites than to physically stock books in real stores. But even allowing for the traditional cut of retailers, a $5 ebook would give them $2.50.

So $5 is reasonable to me. Frankly, $10 is reasonable to me too, but only if the author is getting a 33% cut. But the Angry Robot survey included the implication that being a couple bucks cheaper than the paperback was not what they wanted. What else would I suggest, higher? $5 is a good price, but $3 should be doable with thin margins.