The ebook market increasingly runs on a wholesale model. Here’s how it works: the publisher produces a book and sets an RRP of, say, £10. The retailer then says: we need this book from you at, say, 55 per cent discount. So the publisher gets £4.50 per book and the retailer then sells it for whatever it wants. The 20p ebooks represent a huge percentage loss for the retailer. So why do it? “Because it allows them to consolidate their market share” says Kate Poole, deputy chief executive of the Society of Authors, “then in future when they may increase the price”
Source: The Independent.