I've worked as an editor for a real, commercial publisher. I've edited books for HarperCollins, Chronicle Books, and several other houses. I know what it takes to edit a book.
In addition, I’ve put together a couple of anthologies through Lulu and each one took me at least a couple of hours to get right: even then, I ended up with errors in the layout and design. It takes time to get the title and author’s name aligned correctly on the cover and the spine; to get the cover art in place; to stream the text in properly; to check that there are no widows and orphans; to check that the internal titles and headings have appeared as you intended. Even if all books are submitted to YWO/Legend as PDF files (and how many of us own PDF editing software?), errors will still creep in and need to be rectified.
YWO is proposing to put 5,000 books through a similar process in time for Christmas: as the deadline for submissions is October 31, they’ll have about six weeks to get all the work done--four weeks in November, and two in December. They're going to have to process 830 books per week at that rate, or 167 every working day. Let’s say they’re much better than I am at this, and can process one book in just 30 minutes (and at that rate, they’re not going to have any time left to check for errors): one person, working an eight-hour day, with one hour off for lunch, coffee and comfort breaks (I love that phrase), will be able to process 14 books a day, or 420 books in the six weeks. There’s no way Ted will be able to download 5,000 books alone in the time available. So he's going to have to hire people in to do this for him: if they also can download 14 books a day, he’ll need to hire in eleven people (I’m assuming that he’ll be working alongside them), working full-time, in the run-up to Christmas, with no time allowed for error-checking or quality-control, in order to get these books to print. That’s an awful lot of work that he’ll be doing for free.
However, if people take the £39.95 option then, at around 50p per ISBN, and the UK's minimum wage of £5.52 per hour, assuming all the hired help downloads the books at the unlikely rate of two per hour, YWO will be making £73.38 per hour, which is a much more appealing proposition. At least for the people who will be keeping the cash. For the authors of the books concerned, I think it's going to lead to disappointment and the loss of the first publication rights to their books (and for why that's a much greater loss than might first appear, I'd suggest you read Priceless1's views on the subject--if you go to my blog
here, you'll find a trail that will lead you to the right place).