Ok, I emailed Seth Godin and got a lightning fast response:
"because having my ebook on 300,000 kindles is different than giving my book to 1,000 people who might take it from my site
part of the power here is mass"
I see his point, people who were going to buy his books anyways may end up downloading it for free and he'd lose out on a sale. So his point being authors are willing to sacrifice some revenue in exchange for mass distribution.
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