I'll participate in this experiment
In terms of writer demographics, I'd envision that we'd have a much broader base, as more people would be used to the idea of selfpublishing. There's be selfpublishing eco systems involving some sort of editor function, either through social networking with authors editing for each other and/or as a paid service. Authors would be used to the idea of earning their income through an associated ecosystem rather than through the traditional way, and those that feel they have a book in them would still write and hope to hit it big time.
In terms of market model, there would be a much greater focus on proliferation and derivatives. Just like alot of high quality services are made and given away for free today outside the book industry, the same would be the case for books. Books would be written and then attempted to spread to as wide an audience as possible to build a fanbase.
From that fanbase the author/publisher would earn their income in deriviatives. Extremely cheap paperback books for those wanting a real bound but almost free copy, just making a dollar or so above material cost to be on equal level with anyone else who could just copy the work. Expensive leather bound volumes, perhaps signed by the author. Also some of the income would come from book tours, speeches and merchandise (merchandise with a very low profit margin, aiming at the people okay with paying an extra 1 dollar to get the "official" product". Mainly it'd come from the entire eco system that'd be built around an author, their blog and advertisement, endorsements that'd help other companies products distinguish themselves in a world where everyone can copy their products for free.
Reviewers would be alot more influental, and probably earning a good living. In a world where things are spread for free over the internet, the market would be very saturated. Trusted reviewers that can help people sort through all the free stuff would become alot more important.
Bookstores would still exist, both selling the cheap mass paperbacks and copies, also more luxury item designed to the authors fanbase. There'd be print a book machines, where people can go and buy their own cheap copy for just a few bucks. Just put in the title/name, and it'll spit out a cheap book with a cheapass cover.
Publishers would still exist, they'd probably need to become alot more visible. In a world where everyone can copy for free, and the market is very saturated, a good publisher would be a name brand, helping the consumer sort through the jungle of free books. They'd offer their e-books for free to reach as big an audience as possible and earn their living selling off ads and assorted products. They'd still print books, but at a much less profit margin, they might make endorsement deals with the print a book companies, supplying specialized covers/editions, They'd have a much bigger marketing staff, as they'd be focused on how to spread the free books as wide as possible, through forums and potential fanbases. Also they'd be specialized in making accompagnying products and additional services and finding exactly what products their potential demographiic would be interested in having specialized.
Thats just my idea of how it might look, of course we might kill off books and all be watching TV instead, it's all speculative at this point
But seeing how alot of others are successfull offering their high quality products away for free, I've modelled my vision a bit on that.