Brutally hacked from Eric Flint's statement on the Baen Free Library site........
This all started as a byproduct of an online "virtual brawl" I got into with a number of people, some of them professional SF authors, over the issue of online piracy of copyrighted works and what to do about it.
There was a school of thought, which seemed to be picking up steam, that the way to handle the problem was with handcuffs and brass knucks. Enforcement! Regulation! New regulations! Tighter regulations! All out for the campaign against piracy! No quarter! Build more prisons! Harsher sentences!
I, ah, disagreed. Rather vociferously and belligerently, in fact. And I can be a vociferous and belligerent fellow. My own opinion, summarized briefly, is as follows:
1. Online piracy — while it is definitely illegal and immoral — is, as a practical problem, nothing more than (at most) a nuisance. We're talking brats stealing chewing gum, here, not the Barbary Pirates.
2. Losses any author suffers from piracy are almost certainly offset by the additional publicity which, in practice, any kind of free copies of a book usually engender. Whatever the moral difference, which certainly exists, the practical effect of online piracy is no different from that of any existing method by which readers may obtain books for free or at reduced cost: public libraries, friends borrowing and loaning each other books, used book stores, promotional copies, etc.
3. Any cure which relies on tighter regulation of the market — especially the kind of extreme measures being advocated by some people — is far worse than the disease. As a widespread phenomenon rather than a nuisance, piracy occurs when artificial restrictions in the market jack up prices beyond what people think are reasonable. The "regulation-enforcement-more regulation" strategy is a bottomless pit which continually recreates (on a larger scale) the problem it supposedly solves. And that commercial effect is often compounded by the more general damage done to social and political freedom.
In the course of this debate, I mentioned it to my publisher Jim Baen. He more or less virtually snorted and expressed the opinion that if one of his authors — how about you, Eric? — were willing to put up a book for free online that the resulting publicity would more than offset any losses the author might suffer.
The minute he made the proposal, I realized he was right. After all, Dave Weber's On Basilisk Station has been available for free as a "loss leader" for Baen's for-pay experiment "Webscriptions" for months now. And — hey, whaddaya know? — over that time it's become Baen's most popular backlist title in paper!
And so I volunteered my first novel, Mother of Demons, to prove the case. And the next day Mother of Demons went up online, offered to the public for free.
Sure enough, within a day, I received at least half a dozen messages (some posted in public forums, others by private email) from people who told me that, based on hearing about the episode and checking out Mother of Demons, they either had or intended to buy the book. In one or two cases, this was a "gesture of solidarity. "But in most instances, it was because people preferred to read something they liked in a print version and weren't worried about the small cost — once they saw, through sampling it online, that it was a novel they enjoyed. (Mother of Demons is a $5.99 paperback, available in most bookstores. Yes, that a plug. )
Then, after thinking the whole issue through a bit more, I realized that by posting Mother of Demons I was just making a gesture. Gestures are fine, but policies are better.
So, the next day, I discussed the matter with Jim again and it turned out he felt exactly the same way. So I proposed turning the Mother of Demons tour-de-force into an ongoing project. Immediately, David Drake was brought into the discussion and the three of us refined the idea and modified it here and there. And then Dave Weber heard about it, and Dave Freer, and. . . voila.
The Baen Free Library was born................(End hackage)
What he says rings true.
Give people a taste, give it to them for free, and they'll come back willing to pay for more. Its so simple even drug peddlers use it, and they ain't rocket scientists!
The more an author is read, and talked about the more people will buy his books.
The people who will pirate were not going to go out and pay 15 - 25$ for that hardcover book in the first place. Probably wouldn't spend 8 - 12 $ for a paperback.
I've "liberated" a lot of books, but I very seldom if ever had the money to buy new ones. Once in a while I'd get a gift card for B&N. I think 3 times I've signed up for the Science Fiction book club, get 7 or 8 books for 1$ and agree to buy 2 more over the course of the next year. So you pay 12 - 18$ each for 2 books (choosing wisely of course) and you end up with 10 nice hardcover books for 2.50-3$ each. Not a bad bargain actually. My biggest problem was waiting for them to have enough good stuff to choose from.
If publishers have problems they need to fix the biggest one first. And that is waste, unsold, stripped, remaindered hard cover and paperbacks. Books that are produced that never get sold. Wasted time, wasted material, wasted shipping. Fix that problem and they won't have to worry about the few sales a pirate might have made but chose not to.
Whats more as Eric mentioned above, (More hackage) As a widespread phenomenon rather than a nuisance, piracy occurs when artificial restrictions in the market jack up prices beyond what people think are reasonable.(End Hackage) (Gee the cutlass is sharp today!

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Cut out the waste, remove unnecessary overhead, make ebooks easily accessible, reasonably priced, DRM and geographic restriction free in a variety of formats and pirates will go back to drinking rum and telling tales about "the good ol days".