complete lunacy
First off, just sitting around waiting for someone to write a book doers have costs, but those are soft costs, and lets not complicate things here..
Starting with step 3: First proofread might be 6 hours for a romance novel, but not for a proper fantasy or epic pushing 900 pages. lets be reasonable and give it 2 minutes a page, a fair average for a fast reader who's actually analyzing the story (and taking notes) not just reading it quick. this is not a proofread, this tis the "do we want to buy their book or not" read. lets value this person at $100/hour (their pay is probably $30-50/hour, but they need facilities, a PC, corporate overhead, management, etc; ask anyone and they'll tell you a salaried employee costs $100/hour.... ) First proofread, $500-750 average?
Additionally, we might read 20 books before we like 1 and are willing to publish it. lets say this person finds 3 new books a month to publish.... Cost per book published, probably $4-8K.
Now, from here we change everything: Assuming $100/hour costs...
Step 4: Send book back to author for structural changes. Re-read it again later, this time read deeper, twice as long, a first proofing instead of a first reading). no one submits a book ready to publish, they always require editing... 40 hours for a SHORT book that is completely stand alone. This is also BEFORE we get a contract together, we might not buy this book anyway...
Step 5: legal team. $250/hour, write contract and get author to sign it. Usually a 3-4 book deal, sometimes more.
step 6: Up-front payment. This is "risk" money, paid in advance on a book not done yet. Often, an author is contracted to write 3-4 books before we ever print the first one, and this small income given on meeting deadlines is all they have until it hits shelves. We pay this, and might not sell enough copies to recoup it, thus the risk. Once sales come in, commission/royalties are deducted from the advance (plus a little interest). Depending on the legalese, this could be 3-10K books worth of royalty.
step 7: Final editing, pagination (done for hardcover, book club, paperback, and multiple ebook formats) , book cover design (also varies by book size, done multiple times), could easily exceed 1,000 man hours for a large book that's part of a series, or be as little as 250 man hours for a simple book like a romance novel.
step 8: advertising. For most books, nothing more than a promo pack of some bookmarks and some cover art prints given to the author, and notifying book stores of the impending release, but for the rare book that actually gets marketed (1 in 10), 10-15% of cover price.
step 9, printing and warehousing. Yea, can only print so many a day, and setting the printer takes time during which no books are being printed, so we print a "run" of several thousand to a few million all at once, store them, and then ship them to stores. about 30% of these will not be sold this year (some may never be). For big authors, we'll do several runs, and for some even rarer several "editions" where things get changed (corrections ,bonus material, preview of next book, etc), sometimes all new cover art. Printing costs about 15% of each book, warehousing as much as another 10%.
step 10: sales. seller takes 40-60% off the top from MSRP. 10 or so of each book goes to the author, so the publisher gets 30-40%. A few hundred to a few thousand man hours to pull this off. So, doing the math, a minimum 5-20K invested up front, as much as 1-2K invested in each book we DON'T publish (which are 10:1 more common than ones published), and 70-80% off the top in costs deducted from MSRP. Publisher might get $2-5 per book sold (and 30% might never be). Out of all this, tops, 25% can be removed from the costs in printing and warehousing but amazon takes 60% where most retailers take only 45%, so that's mostly a wash. Total costs to publish an ebook are 1-2% less than real books.
You don't understand the publishing industry at all, or its fixed costs, you've not taken permanent or soft costs into perspective, I didn't even go into hosting servers for the author's blogs and such... Books have very slim profits. Publishing costs are increasing, not decreasing, as technology advances. eBooks are an additional cost, not a cost to themselves, but each one is the loss of a real book sale. Yes, making an e-book from a book already published is cheap, but selling one to someone who does not already own the book is a money looser. Old books sell for $4-7 in paperback, so $3-5 ebooks are a good sale. First release? If the ebook was $4, who would buy the $29 hardcover? If we scrap the hardcover, all that cost falls to the ebook anyway, and initial sales would still have those books costing $20-25 each (declining over time).