The entire publishing process is designed to filter out the chaff. First you need an agent (this is undeniable when some publishing houses won't accept a submission without one) whose job it is to first find publishers that are interested and then to make them pay every penny they're willing for it. When a first time author like Stephanie Mayer gets handed $750,000 for a series, that's because their agent just got handed 75,000-112,000. If you go it alone you'd probably get less than what your agent alone would get.
After the books in the publishing house, it is usually reviewed by like up to 5 editors who give their opinion before it's handed over to one editor who they believe is the best for it. You then get an editor, who through multiple revisions helps the author get the book to a better standard and quite often to more closely resemble the authors original idea.
I've worked with editors, and they're very passionate and put a lot of themselves into the work. This isn't something you're going to get at some slapped together organization. The argument that they're being replaced by digg (in the disaggregate link) is completely laughable, I'm sorry but digg and HN link mostly to articles at websites that all have editors. Just because people aren't committed to one information source and choose their own news (hence why some people get several news papers in the morning) doesn't mean the editors job is [gone].
Then he argues that it's help authors by allowing them to produce more books... Some authors release a book every few years and some release one nearly every 3 months (Stephen King). This isn't an efficiency model that can simply be stepped up by a new technology. It's an entirely ignorant argument.
This article is just plain bad. No one should sell their work at $9.99 a copy if it isn't going to cover the costs. In the publishing world especially, you should never release a copy for such a low price when the majority of books make most of their money in the first few months to a year when the book is priced the highest.
I hate these articles, because they're always written by people who are so uninformed on the issues. They're by people who assume the end is nigh for corporate publishing, despite the fact that there's been little to no effect on traditional publishing media, in fact global book sales have been on an increase over the past years.
Actually, I do deal with publishers quite a bit, as well as music labels and broadcasters. It is not that they are not dedicated to their work. Unfortunately, the economics of the Web works against these cost structures. It might not happen to books yet but with new reading devices and new marketplaces coming up, I think changes will come.
As to my comment on new genres of books being created, this argument is not unique. Every new medium will create a new form of media that suits its characteristics. Online video created 1 minute clips. Mobile created mobile books (in Japan currently).
The price should be set by supply and demand to maximize revenue. Selling three ebooks for $9.99 is better than selling one ebook for $26.99. Period.
Now, where do supply/demand curves maximize ebook profit? I don't know. But there is every reason to think that in the current market, the intersection point is much lower than the hardcover prices.