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IMPO, there has been a lot of good discussion in this thread, a lot of good points.
How successful the hardback first, paperback in a year model works depends on what type of reader you are and who the author is, IMPO. There are a lot of different reader types out there.
Personally, I have some authors whom I like enough that I will pay the hardback prices to get the book as early as possible. Heck, there are some whom I've paid extra for an ARC just to get the book a couple of months early via Baen Books. So if the publishers went right to paperback prices they would lose that money. Other authors, I tend to wait for the paperback. I also tend to not spend hard back money on new authors unless there is something really, really compelling about the book.
I tend to agree with the earlier poster that most of the downsides to waiting a year to release at paperback prices also exists if you initially start at paperback prices.
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