In a recent interview with Digital Book World, the writer and creator of the Domino Project [...] was asked about his advice that authors should give their books away for free and that they should worry more about spreading their message and building a fan base instead of focusing on how to monetize it right away. And how would he respond to writers concerned about their ability to make a living from their writing? Godin’s response:
Who said you have a right to cash money from writing? Poets don’t get paid (often), but there’s no poetry shortage. The future is going to be filled with amateurs, and the truly talented and persistent will make a great living. But the days of journeyman writers who make a good living by the word — over.
It's hard to disagree with him. Writing has never been a particularly financially rewarding pursuit, much like any art form. There will always be outliers who become ridiculously wealthy, but having an expectation of becoming that famous author is counterproductive, in my opinion.
I don't think books should just be given away for free - things that are free are perceived to have a certain value (ie. nothing) and I value my work a few cents more than that. However, that doesn't mean books should never be given away for free. Getting a fan base with which you can connect as a creator is important, and giveaways are a part of getting new people exposed to your writing.
Mathew also talks about getting a perspective on your writing with regards to its quality:
[M]aybe those vampire books by Amanda Hocking or the detective novels from million-selling author John Locke aren’t as good as yours, but for hundreds of thousands of weekend readers they are probably good enough. Godin’s point isn’t that you can’t make money; it’s that you have to think differently about how to accomplish that task.
I always ask authors who are concerned about things that apparently make them lose money (piracy is a perennial favourite): 'If you were guaranteed never to make a single cent from writing, would you stop?'
If you answer 'yes' then I think you probably shouldn't be writing at all. If you answer 'no', I think you're probably ready to think about how you will try to make some money out of your writing.