It's a good idea. A group of well known and well respected authors, encouraged by their agent, have formed Odyssey editions to sell their work as Kindle ebook editions. All of the books are at reasonably low prices e.g. $7.56 for Salman Rushdie's Midnight's Children, and they mostly (but not all) undercut the price of the paperback edition ($10.88 in the case of Midnight's Children. Not all of the books are priced at under $9.99, which is Amazon's target ebook price, but they fit better with the idea of low priced ebooks than many publishers' offerings.
The list of authors and their works can best be described as "modern classics" but the most important and interesting thing is that the motivation for the move seems to be a dissatisfaction with traditional publishers' reluctance to offer reasonable terms for ebook rights. Under most older contracts ebook rights remain with the author - newer contracts explicitly mention ebook rights and claim them for the publisher.
Currently publishers offer authors around 25% for ebook sales but simple economic arguments suggest that it should be somewhere in the region of 50% to reflect the lower production and marketing costs and the lower risk taken by ebook publishers. Amazon's latest publishing deal offers self epublishing authors 70%.
Random house is disputing Odyssey's rights to sell the ebooks and has written to Amazon.
Some have pointed out that an agent turning into a publisher is an unacceptable blurring of the lines and unprofessional in the sense that the agent should be a negotiator and work to achieving the best deal with the publisher not become the publisher. However, this misses the point. In an epublishing world the role of publisher is virtually redundant in any traditional sense.
Currently publishers cling to their existing models and economics because they can. Paper books are still important and publishing a paper book requires investment and the taking of a risk. For this publishers get to exercise their judgement on which books to publish and deserve a higher return than the creator of the work because they take the real risk in the enterprise.
Epublishing is so cheap that production costs are hardly worth factoring in to the equation and the risk factor now mostly falls on the author. If an ebook fails who loses out? The publisher to a small extent but the author to a large extent because of the huge amount of time invested in the project.
So what are publishers to do?
If authors take ebook rights away and self epublish then the risk factor in publishing paper editions is made all the higher as there is no ebook "cream" to increase profits at no extra cost. Perhaps publishers will take the attitude of no ebook no paper book either and shut up shop on authors who don't play ball. On the other hand the author making 70% on cover prices that are reasonable enough to ensure ebook sales might not care about the minority income lost from there not being a paper edition.
Perhaps this is the conflict that finally causes the revolution.