For an interesting perspective on this, visit Baen books, a publisher that has been very innovative in the digital realm. Their webscription service and "free library" have been an incredible gift. Check out their discussion of the role that free material plays in INCREASING their bottom line.
Additionally, Baen books has begun releasing CDs with some of their books that often contain the entire backlist of an author in perfect digital quality. Jim Baen has been a firm backer of all of these and has been happy with the outcomes.
Tim, couldn't agree more and interesting to find a publisher in Baen books who actually think like we, at Cool Publications, do. We price our books so that savings we make get passed on to the reader and refuse to lock them so they can be shared or transferred between devices.
The argument of how much piracy costs book publishers, recording companies and film studios (usually quoted as $X billions per year) seems to be underpinned by the questionnable assumption that the only copy of any creative work that should be in circulation has to be a paid-for one. Those of us who owned double-tape players in the 80s and twin-play videos in the early 90s know that piracy is the direct result of a combination of perceived value, availability and pricing. Baen Book's approach has independently been championed by us at Cool Publications <a class="jive-link-external" href="http://www.coolpublications.com" target="_newWindow">http://www.coolpublications.com</a>. Against almost the entire industry we publish our books in an unlocked format that allows our readers to pass them on, transfer them between their PC, laptop and PDA and loan them to their friends exactly as they would with a paper copy. Affordable prices and flexibility in use would go a long way towards stimulating demand and helping both publishers and authors in terms of greater sales.
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<a class="jive-link-external" href="http://www.baen.com/library/" target="_newWindow">http://www.baen.com/library/</a>
Additionally, Baen books has begun releasing CDs with some of their books that often contain the entire backlist of an author in perfect digital quality. Jim Baen has been a firm backer of all of these and has been happy with the outcomes.