[anurag]

From http://www.tbiresearch.com/e-readers...ishers-2009-11

Wall Street can't help itself.

With all the buzz around e-readers, analysts expect big numbers out of hardware sales and e-book consumption. While hardware sales may experience huge growth in the coming years, we believe many underestimate the losses companies like Amazon will need to weather before selling e-books becomes a meaningfully profitable business.

Currently companies like Amazon lose about $2 for every e-book (we discuss this below). So, if it sells one million e-books the company loses about $2 million.

Analysts keep one-upping each other with forecasts of profits in 2012-2014. What they aren't telling you is that this will require publishers to radically reduce the prices at which they are selling e-book licenses.

Will this happen?

It should. Publishers should move to a high-volume model where they sell more units for less. But "should" is very different from "will."
In any event, in order for the e-reader market to thrive publishers must lower their wholesale prices so that distributors can turn a reasonable profit. We believe that if the price is lowered enough publishers may earn less per unit, but could ultimately earn more in overall revenue and profit through a greater number of sales. This, of course, benefits the e-book distributors as well.

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