Furthermore, no printing or distribution costs are associated with an e-book. No brick-and-mortar storefronts or expensive retail leases, either. Consumers understand this and expect to see these cost savings reflected in the price of e-books. Amazon gets it too, but publishers apparently don't.

Perhaps Murdoch is right--almost. Kindle's pricing doesn't devalue books. It devalues e-books, and for good reason.

And don't forget the cost of the e-reader itself. The Kindle costs $259, no small sum for a limited-use gadget. And yet the Kindle has proven successful because it's convenient (a thousand books in the palm of your hand!), has an impressive E-Ink screen that's easy to read, and can save you money in the long run if you buy enough $10 e-books. (OK, maybe a really long run, but the value proposition is a strong selling point.)

What's ironic for Apple and its Kindle customers is that will likely lead to higher e-book prices. This may be one of the few cases in the history of capitalism where increased competition has actually hurt the consumer.