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I agree, but even paid ebook sales are still small. So while it's true that so far free ebooks don't seem to hurt paid ebook sales or paid pbook sales, if ebooks become increasingly popular in preference to pbooks, then free ebooks could begin to hurt combined ebook/pbook sales. And this is true whether the free ebooks are from the publisher or from pirates.
But I'll stipulate it's still too soon to tell, and so far Baen's model is working well.
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