I cannot fathom that the publisher performs any function possibly worth this much money. How, since we no longer have to ship dead trees, have we not evolved a system that gives authors 75% of the sale price?Because the dead trees are only about 10% of the cost of publishing a book (and since the tax laws for ebooks are different in many countries that saving is often immediately eaten up by higher taxes).
Because many (most?) authors want to spend their time writing - not publishing. Because producing a book takes time and money. Because publishers also essentially act as the VCs of the book market. Most authors don't earn out their advances.
Take a look at the breakdown of the cost of a bestseller http://journal.bookfinder.com/2009/03/breakdown-of-book-cost... for some vague evidence on how much money publishers actually make out of a book.
(The slice taken by marketing in the above seems high from what others have told me. Its also a somewhat simplistic breakdown since it ignores some of the long-term costs from publishers that aren't related to "books" directly. e.g. the advances to authors who never get published, etc. - so the potential publisher profits aren't quite as large as they appear here - there's other overhead outside the printing/distributing/selling books bit)
Also see http://ireaderreview.com/2009/05/03/book-cost-analysis-cost-...
It's also something Charlie Stross has posted about a fair bit see this collection of posts http://www.antipope.org/charlie/blog-static/2010/04/common-m...
TL;DR - people think about book prices being related to cost of producing media. That's like thinking software costs are mostly about the price of printing DVDs or shifting bits. It's mostly about book development costs - not media costs.