You missed out "and Amazon can set the price they sell it at".<p>So: you (the publisher) guarantee not to sell ebooks for less than $9.99 elsewhere, and not to publish a dead tree edition for less than $12 ... and Amazon are free to cut their competition off at the knees, sell books for $6, drive their competitors into extinction, and <i>then</i> can raise their price to whatever the market will pay.<p>Meanwhile, as the author's royalties are a percentage of the SRP, that 10% of SRP cut they're due -- $1.20 of a $12 title -- comes out of whatever Amazon pays you -- $4 in the case of a book they choose to sell for $6 on Kindle. The SRP is set to reflect the price at which the publisher <i>expects</i> to sell enough books to gain sufficient sales to break even -- assuming a 40-50% discount. If the discount goes to 70%, they're in the stinky stuff up to their eyeballs. That $12 ceiling is forced on what was formerly a $24 SRP, and a $14-16 expected sale price. The money has to come from somewhere, and it ain't going to come out of Jeff Bezos' wallet ...