The price erosion isn't that great yet on the Kindle there are still plenty of $9.99 and higher e-books out there from traditional publishers. In some sense, what's happening in the Kindle Store is what's already happened in Apple's iPhone App Store, where developers have been forced to lower their prices to 99 cents to compete (recently, Angry Birds' maker Rovio told fellow developers to get used to pricing their apps at 99 cents). 'To keep the book on the list as long as possible, I'd just switch it back to 99 cents and it would quickly climb the list again,' Smith says. While he drifted downward on the best-seller list, if he priced at $2.99, he says he was making significantly more money. For every $2.99 book he sold on the Kindle, he needed to sell six books at 99 cents to make the same amount of money. Later, when he was firmly planted in the Top 100, he started playing with pricing and listed the book back at $2.99. 'When I went to 99 cents, I was going for longevity,' Smith says. 'Fifth Avenue' spent three months in the Amazon Top 100, mostly selling for 99 cents. His sales, he says, are in the 'six figures,' and he's now represented by an 'A-list' agent, Matt Bialer at Sanford J. Thanks to some controversy over gay sex scenes in the book that touched off heated discussions in Amazon's Kindle message boards, Smith says 'Fifth Avenue' remained in the Top 100 for three months and also has done well on Amazon's U.K. After the initial rise, Smith then decided to drop the price of the book to 99 cents to maintain his ranking in the top 100, which is key to generating sales. He says that with some social media outreach-he did an iPad and a Kindle giveaway for those who tweeted about the book-and little else, the book quickly reached the Amazon Top 100 and peaked at No. And some really took off.Д¬hristopher Smith, who wrote the novel 'Fifth Avenue,' priced his novel at $2.99 when he launched it last October. Some authors started saying, 'Screw it, I'm not selling that much at $2.99, I'll just go to 99 cents and see what happens.' And bam, some of these books took off. But then something happened on the the way to the check-out cart. Still, you'd think that most people would choose to go for the 70 percent royalty.

That's a big difference, but it's still better than what you get on an e-book from a traditional publisher (25 percent of the net sale, which comes out to around 17.5 percent of the price of the book). That means that if you set your price to $2.99, you make around $2 on each copy you sell, which is damn good, especially if you sell a lot of copies, which certain indie authors do.Д«ut if you drop below $2.99, you end up with a 35 percent royalty. Why $2.99? Well, if you price your e-book at $2.99 or higher, you get a 70 percent royalty from Amazon when using its Kindle Direct system, or 65 percent from Barnes & Noble when using its PubIt self-publishing platform. Just last year, the magic price point for a lot of indie ( self-published) authors was $2.99. But it's a bit more complicated than that.ДЇirst, a little history. These publishers have been gouging us with ridiculous pricing for digital files that cost next to nothing to produce (in terms of material costs) and finally we're starting to see lots of deals out there.

Now, I know what you're saying: that's great news. Or put another way, the blogification of the book industry. But while piracy is certainly an issue, there's something else lurking out there that may be a bigger problem: e-book price erosion.

Not long ago I did a story about how e-book piracy was accelerating and that publishers should be concerned. Around 20 percent of the 100 best-selling Kindle books cost a dollar or less.

Kindle direct publishing best sellers