Because publishers used a system called agency pricing to raise e-book prices, there are now several people speculating that if agency pricing comes to an end, traditionally published e-books will drop precipitously in price, destroying the price advantage that indie e-books have.

To which I say: Not so fast.

Agency pricing just means that the publisher sets the retail price of the book, and the retailer takes a cut. That's all. Large publishers can and do offer e-books for 99 cents. They just don't do it very often, because they can't afford to.

Why not? High costs. How high? Well, let's take as gospel this back-of-the-envelope calculation by the Wall Street Journal and say that, in order to cover their costs and make an acceptable profit margin, a large publisher must make at least $9 ($9.09, but we'll round) on an e-book.

In the traditional book retailing model, the retailer pays a wholesale price to the publisher, and then the retailer can set the sale price however they like.

The publisher still sets a price--but it's the wholesale price, not the retail price. If the publisher needs to make at least $9 on each e-book sold, then the wholesale price is going to be at least $9.

That puts a floor under the price--the retailer can price the book below $9, but they're going to lose money.

They might do it anyway: Agency pricing was forced down Amazon's throat because they were buying e-books from publishers for $13 and selling them to the public for $9.99. They took a $3 loss on e-books because they wanted to spur the sales of a weird new gadget called the Kindle.

That was a couple of years ago, which is an eternity in e-book land. The Kindle is no longer weird and new--it is one of Amazon's best-selling items.

So, I'm going to guess that nowadays, Amazon is a lot less likely to be willing to take a bath on e-books. Indeed, Amazon now sells Kindles at a loss to drive the sales of e-books, so if they start selling e-books at a loss, too, they're going to get into big trouble--they need to make a profit somewhere.

Amazon may well retail a hot new best-seller for a few bucks cheaper than the competition (as they do with paper books), but I don't see them taking a book they paid $9 or $13 or whatever wholesale price publishers want to charge ($20? $25? $40?) and marking it down to $3 or 99 cents. Taking a $6-$12 loss on each copy of a book that sells millions of copies is going to be tough even for Amazon to keep up.

The cost structures of indie and traditional publishing are just so different that it creates a huge gulf in the prices they can charge--and those cost structures won't change in a hurry. Look at that number that caused so much drama: $9.99. Amazon was selling e-books for $9.99, and publishers panicked. Meanwhile, over in indie publishing land, $5.99 is seen as quite expensive, and people are afraid to sell stories for 99 cents.

Which makes it less likely that Amazon will drastically cut prices on traditionally-published e-books: They have this huge library of indie books now that, for the most part, sell for less than $4.99. And they make money on those cheap books! They don't need to take a $10 loss on some traditionally-published book in order to convince people that it's worth it to invest in a Kindle. They can offer a ton of $3 books instead--and make a profit!