Whether I download pirated ebooks or not, is immaterial to this post. I do not take a stance on the ethics, legalities and justifications for that. This post merely details that though this seems an altruistic effort by benevolent people who find ebooks/scan physical books, and then upload them, it is rarely the case. Instead, everyone involved in the process gains something.
Take for instance a 400 page fiction book. In PDF/LIT/epub format, it may be about 3-4MB(max). On Amazon or on legitimate sites, it may cost $5+(median range would be around $10-$15 per ebook). People may spend $30 on coffee but would hesitate to spend part of that on ebooks, especially if it is available free. So as I understand, legitimate ebooks are purchased once, unlocked and then shared. But someone must compensate the original uploader for his ebook purchase costs/time. That is where file hosting sites come into place(like megaupload/filesonic/rapidshare etc). They host for free, the ebooks/other digital content. The uploaders are paid per click, depending on the country of residence of their downloaders, file size etc. The file hosting site makes money from advertisements and from subscriptions. The free service is degraded so much(slow downloads, single downloads only, file restrictions etc) that for downloading a large number of ebooks, it does make economic sense to take a subscription, stockpile all those links and download them in a single sitting. Even if you save 20hrs for a $9 monthly subscription, it does seem worth it.
In this, the platform(file hosting service) makes the maximum money.The uploaders earn a bit with zero marginal investment, and recover(if lucky) the cost of getting those ebooks. And the downloaders get ebooks quickly and cheaply(cost may be as low as 1 cent/ebook excluding download costs). In all this, the publisher and author lose out, but the thing to consider is that people often do not read ebooks(estimates put the number of ebooks purchased but not read at 30%, this would be higher for pirated ebooks), also that not all can afford those many ebooks.
This does hit legitimate Eastern Economy editions in countries like India, but then like how bands have slowly accepted live performances as their main revenue source shifting from music royalties, authors may need to accept consulting assignments, script writing projects etc as their main source. This of course, works more for non fiction authors than for those who write fiction.