I don't really get this analysis. If I'm at all typical, then the reason amazon can lower its prices on eBooks is not to sell more Kindle devices. I've got Kindle software on my PC and my iPad. That's where I do my reading of the eBooks. Amazon is not making money on me from its new devices. (I did buy an original Kindle way back when.) Indeed, I think Amazon will lose the device war.
But it will win elsewhere. I believe the right metaphor is to think of Amazon doing to online shopping what Walmart has done for retail. Amazon can lower its eBook prices for me because I buy other stuff from Amazon too. Being a frequent shopper with them has value. Using book buying as the initial hook is smart business.
The irony in all this is that nobody has gone back to basics and ask what the costs in paper book selling were like. Amazon using $9.99 as an anchor for its pricing comes from where? I seem to recall something like that for paperbacks when I'd occasionally buy them. Shouldn't the eBook price be lower than that?
I do believe that publishing, like movie making, has been a blockbuster business. So I can understand that when a publisher has a best seller the publisher wants to milk it. In the old days, that is why the hard cover version was released before the paperback. Maybe that approach to the business has to change. With less earned from the big hits, they have to trim their costs in promotion and do more modest projects. That clearly will be a minus for very well known authors, but for the person doing their first book this should be a plus.
As I wrote a while back in a post entitled Do we still need commercial publishers? there is a need in the presence of disruptive technology to experiment with new forms of organization. One should not presume that the old form must survive. I believe the publishers, like the big movie studios, make that presumption. If we had such experimentation and it was rigorous, and if at the end it was concluded that no alternative form of organization will work, then the publishers would have firm ground to stand on. But the experiments clearly haven't been done yet. Given that, the argument to preserve the old forms looks self-serving. What is really wanted seems to be to preserve the monopoly rents, not for Amazon but for the publishers and the well known authors they have under contract.
It would be refreshing to hear just one well known author say s/he is okay with getting fewer royalties on the next book and would be happy if because the price was lower more people will have read it. But I'm not holding my breath on that one.