I would just add the point  that there are significant costs involved in the publishing of paper books, which don't exist for ebooks. These are not the costs of manufacture/distribution which everyone focuses on, they are the costs of production. As David will be well aware, Macmillan and all the major publishers run production departments, staffed by individuals who interface between the editors and the printers. A lot of time and resources go into that process, though I'd hate to hazard how much this would cost the publisher per title. With ebooks, that cost (and an entire, tedious, time-consuming process) can be eliminated. The book can be sent to Amazon (or whoever) directly from the designer's desk.

This may be my nasty suspicious mind, but I do think publishers see ebook as a way to make a cheaper product than paper books, but sell it for only a little less, *and* persuade authors to accept worse terms (by agreeing to royalties based on price received, not list price). They may have a reasonable argument that the basic costs of ebooks are not significantly less than paper books - but the reality is that once established, they *will* cost publishers significantly less to publish, given the various hidden economies they'll be able to implement.

Another financial advantage would be that publishers could, in theory, publish as many books as they like. On the basis that one in five books makes money for a publisher, the greater the number of books published, the greater the number of bestsellers. In fact, this is precisely what Macmillan are planning to do, as an extension of their Macmillan New Writing imprint.