Someone started a thread today complaining about all the free books on the bestseller lists-- a perennial complaint over on Amazon. I pointed out mildly that the only benefit to publishers in making their books free is that they DO get onto the bestseller list, thus garnering attention for the author's and publisher's other books. Thus, if you take them off the bestseller list, there will be no more free books.
At that point someone else posted, "I agree that the free books skew the rankings. They should have all the free, and almost free books in a separate category. It doesn't look good when your book listing shows that 55% or whatever bought another book after looking at yours. And when you look at the price it's free or almost free. Totally unfair comparisons. Apples to oranges. If all of us with books on Amazon over a certain price point were playing on a level field, the results would be far different."
Interestingly, this was posted by someone who posts on the indie threads, but she's selling through a small publisher, so her price is fixed at a higher point. Presumably she feels this puts her at a disadvantage. I've discussed this with her on the boards before, but I don't want to hijack a thread about free books and turn it into a thread about the merits of low indie pricing, so I won't discuss it over there this time.
However, my response to this argument previously was that 99 cents or $1.99 isn't free; I'm pricing my book to move, and I can afford to do that because my overhead as an indie is very, very low. Of course publishers have a lot more overhead, but if you choose to go with a publisher, you're choosing to go with a higher cover price. But you're also choosing to go with a professionally designed cover, a professionally edited book, and a company which does some of the marketing for you (even in the case of small presses), so it should all even out.
A free book is by definition a loss leader-- you CAN'T make money on that particular book (though it may earn you lots of sales on other books). But some writers are in fact making money on low-priced indie books-- look at J.A. Konrath for the most notable example. I'm covering my costs, at least, although indie publishing will probably never make me rich. So why exactly should low-priced indie books be kept off the bestseller lists? In my opinion, it would unfairly penalize indie writers, and I simply don't see a good justification for it.