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If I remember correctly, one Smashword official once said in a thread around here, that they are working on accepting epub directly. It is just not a high priority for them.
Of course not all authors can produce perfect epub files, but there are a lot of authors coming here with questions about broken Word files that do not pass the meatgrinder. So creating well styled Word files is not a skill known by all authors either.
No one ever said it has to be an either-or situation. Just because Smashword starts to accept epubs does not mean they have to stop accepting Word files.
In my opinion they would do good to open up to accept epub. That way all those authors that can't reach the other outlets, because of not living in the US, got a chance to provide their readers with beautiful ebooks. Whether they create them their selves or let others create them is another question.
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