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It may be working for Baen and some of their authors at the moment. But all of those rely on physical sales too. If more people move to ebooks, more will discover the ability to pirate ebooks -- and then they'll just do that, and rarely buy at all, even if the ebook is cheaper than they were buying before. That is my fear, anyway.
Let me also point out that Baen still rejects lots of good books from new authors every year. They could "easily" publish all of those in ebook form and see what sells and what doesn't, yet they still rely on physical sales for their authors. It's not just a quality issue.
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