Found via Twitter from @Hadrien: the Conversational Reading blog remarks on a Publishers Weekly article confirming that Amazon is, indeed, losing money on every $9.99 Kindle e-book that it sells.
As the articles point out, Amazon has to pay the same wholesale price to the publishers for e-books as for print editions of those books—more or less half of the print edition price. (So do other e-book vendors; this is why even Fictionwise must charge excessive rates for books from publishers such as Random House, though they do they best they can to bring the prices down with discounts.)
Amazon then can choose to sell it for however much Amazon wants: whether it comes out ahead on the deal is entirely up to it. Thus, Amazon sells it at below wholesale, as a “loss leader”—breaking even or losing money on the deal to promote sales of the Kindle and grow its share of the market. (Giving away the blades to sell the razor, as it were.)
razor analogy
That would be, “Giving away the razor to sell the blades.” 😉