"...they also cost ~$0 to distribute, while the cost of paper is quite high..."
No, they do not cost $0 to distribute. I really don't get how people get this idea that just because digital data has no physical existence, that it somehow doesn't cost physical money to distribute. Do you think that the ebook, music, video or whatever data just magically floats though the ether into your reader/player or something?
Now before I go on, I want to state for the record that deteriorating ebooks, like all forms of DRM, is a really stupid idea and will merely encourage piracy in a big way. On that score I'm with the majority of readers here.
That said, my company runs and maintains several e-commerce websites, including an ebook retailer, and we also have a publishing division where we set up, design covers for, proofread, typeset and lay out books (both paper and digital) for our authors. (To make a point, authors occasionally ask us about copy protection on ebooks and our stock response to them is that it's a waste of time and money. If people are going to pirate your book they will find a way, and making life difficult for legitimate customers will only compound the problem.)
It costs real money to run and maintain websites and app stores, which are the primary method of digital content distribution. Bandwidth costs money - a metric fuckton of money if you get a lot of visitors trawling through your sites. Hosting costs money. There's domain registrations, SSL certificate renewals, payment gateway fees, transaction fees, merchant account fees and of course all the plethora of government levies, taxes and tariffs on same. Then there's the small matter of hiring tech support to maintain and update the sites and sort out any issues, and people to read and answer the piles of emails and phone enquiries coming in. On top of that you also have payroll costs, worker's comp insurance, various workplace OH&S compliance costs, software licences, hardware upgrades, office rental, utility bills, accounting fees, etc, etc, etc. Oh, and there's advertising and marketing costs to factor in to all that as well, so that people know about our books and come to the site to buy them. It all adds up.
So what it amounts to is that one set of costs has been replaced by another. Instead of printing, trucking and warehousing costs for dead-tree books we have bandwidth, hosting, site maintenance and payment-gateway costs for ebooks instead. Yes, on a per-book basis the latter is certainly less than the former, and yes, our ebook prices vs paper book prices reflect that; but the cost of distributing digital content certainly isn't zero. Not even per book. Not even close.