Who is going to win? Bet on Bezos. The mainstream publishers can hold on for a while, based on reputation and while e-readers aren’t widely available; there’s still some prestige to being published by a reputable publisher like MacMillan. But eventually, some publisher will realize that a book that would have sold for $29.95 in a physical edition can be sold for the cost of the royalty, plus a small markup for production and administration. Our $29.95 novel would sell instead for $3.95. When that happens, except for coffee table books and an occasional print-on-demand hard copy, the physical book is dead.
The dead tree book business is dead, it just hasn’t realized it yet.