A while back in a blog post for work, I wrote about (among other things) how I feared the prevalence of cheap $1-and-under e-books would cause the market for same to fall through entirely. I'm pleased to report that, as far as I can tell, I was wrong.
For indie publishers, like myself, the proper price point now seems to be around $5-7. Anything more than that puts you smack into competition with the big publishing houses (who are willing to charge as much as $15 or more); anything less than that marks you as too desperate to be serious.
It's the latter condition I was worried about — that the prevalence of $1 books would make it impossible for anyone with a genuinely good book to compete on the basis of anything but name recognition (which is orders of magnitude harder to achieve for yourself in self-publishing). But it doesn't take much research to determine that the vast, vast majority of the stuff in the digital dollar bin is there because the people selling it can't charge any other price for it with a straight face.
This may seem like a paradox in an age where digital goods can get marked down to nothing thanks to your friendly neighborhood pirate network, but setting a price on something is a form of advertising. Too high a price and you drive off most of your potential audience; too low and you send a signal that you're simply interested in hustling as much as you can, as fast as you can, and that you're not confident in the quality of your goods. And since digital goods are not like cars on a backlot, there's no incentive to put them "on clearance" — you can drop the price for a time as a promotional effort, but you don't do it because you're trying to make way for the 2014 models.
I also wrote a while back about the DRM problem. I'm still not comfortable with the idea of having my Kindle products DRM-protected by default; as soon as I can get the pipeline together, I'll be setting up an account with Smashwords or some other DRM-free e-book system. But I also have to ask myself whether or not I have the freedom of being uneasy about DRM simply because I haven't lost all that much to piracy yet. I might think very differently about it if that happens. You never know what the underside of the bus is like unti it rolls over you.