In 1999, Baen Books instituted the policy of buying all electronic rights in contracts with its new authors. Unlike its major competitors, the house pays its authors a handsome 20% in royalties for its eARCS (electronic Advance Reader Copies) and individual e-book sales. (Writes Weisskopf on the company's community messageboard Baen's Bar: "There is a complicated formula for calculating the e-book royalty Baen pays, known only to the Mysterious Marla […] Authors and agents do get the formula, but only if they can tell me or Marla the air-speed velocity of an unladen swallow!") Since then, Baen Books has acquired the work of many classic science fiction authors, including Fritz Leiber, Orson Scott Card, Peter Straub, Dan Simmons, L. Sprague de Camp, and Larry Niven.

The Last Centurion

Jim Baen's insistence that his e-books be free of format restrictions, an insistence that echoes Stewart Brand's observation, “Information wants to be free,” underscores the company's belief that electronic publishing technologies should empower the end user. For example, Baen Books does not offer any of its titles in PDF format: "What [PDF] does is generate files […] that are extremely opaque to standard word processing software, so that if, for example, you downloaded Time's table of contents, you would be stuck with that appearance: no changes allowed, or possible. Can't change the margins, can't change font sizes, can't grab text for pasting, can't anything." Instead, Baen sells printable, multi-format, DRM-free e-books through its fifteen-dollar WebScription service, which puts out electronic galleys of novels undergoing editorial development at Wake Forest for readers to purchase before the novels appear in print. The WebScription package includes at least four new novels that are released in portions as editorial development approaches the print publication date. These e-books are available in HTML format before the novel is published; once the print version is released, Baen releases the WebScription bundle in MS Reader, Palm, Psion, Rocket eBook, and Rich Text format. In addition, Baen sells individual eARCs—complete, unedited manuscripts of novels in development—for fifteen dollars well in advance of even the WebScription release dates (more than five months pre-publication). The price of eARCs decrease as the novel comes closer to its publication date, recognizing that readers’ demand for the unedited manuscript wanes as the fully-edited version nears completion.

Jim Baen moved from the lowly complaints department of Ace Books (the granddaddy of science fiction publishers in the United States—now an adult imprint of Penguin), to Galaxy and If magazines, and later Tor, to found Baen Books in Wake Forest, North Carolina through a deal with Simon & Schuster, who had originally hired him to reorganize their science fiction Pocket Books division. Jim would provide Simon & Schuster with a line of science fiction books for the publisher to distribute, and in turn he would have the freedom to run his own publishing company. Much of Baen Book's success with e-books may be attributed to Jim Baen's freedom to pursue a model for the distribution of e-books that ran counter to "established" wisdom. Like the "philosophy of free" touted by Wired Editor-in-Chief Chris Anderson in his 2008 article, "Why $0.00 is the Future of Business," Baen Books' electronic publishing philosophy proposes that businesses can make money on the web by literally giving away their products. This radical thinking—which has both gumption and solid figures to back it up—was not so radical to Baen’s editor-novelist and "First Librarian" Eric Flint, who at the turn of the millennium expounded on the company’s philosophy in straightforward analogies, like this one:

[The] internet has internationalized the reading audience to an extent which was unimaginable in the days of purely paper communication […] whatever income an author loses from the theft which the internet makes possible is more than offset by the expansion of his or her potential audience. […] Any retailer in the world, after all, can put an absolute stop to any shoplifting instantly. Just require your customers to undergo a full search when they leave your premises—including body cavities. Yup, no more shoplifting. Congratulations. Oh—and, yup. No more customers. Congratulations.

Flint's "Prime Palaver" series started as a response to Baen Books' decision to open the Baen Free Library and grew to encapsulate one of the few early dialogues about "freeconomics" [sic], as a viable model for increasing the sales of both print and electronic books. With Jim Baen's support, Flint started the Baen Free Library as an online repository for unencrypted, full-length Baen texts. As of 2008, the Library hosts 111 novels, all of which are available for free download in multiple electronic formats. Contribution to the Library by authors is entirely voluntary, though first-time authors are encouraged to deposit their debut novel no earlier than nine months after the book has been published, in order to drive the sales of future novels. And while the Library is a primitive artifact on an Internet of Web 2.0 wonders, the fundamental formula underlying the site is forward-thinking: that "zero from zero equals zero" and that making authors more accessible to readers through the web will drive sales. "It's a misperception on their part," writes Weisskopf of publishers unwilling to free e-books from the shackles of DRM encryption "[…] they think in terms of 'lost sales' not 'new customers created.'"