It appears that the new pricing will apply to future items, and existing ones if and only if I update them (which I don't need to do). So I can continue collecting my existing royalty of $2.80 from every copy of Chessudoku and $0.80 from the flash cards. Nobody's bought either product in the few days since the change, so I don't know for sure that it still works, but it seems to be what the documentation says. My royalties change to $1.61 for downloads of Chessudoku (remaining at $2.80 for hardcopy), and "sorry, you have to discontinue these or raise the price" for the flash cards, if they become eligible for the new pricing.
If it were only the pricing issue, then I'd think twice about using Lulu for future projects, but I probably wouldn't pull my existing ones; it won't break if I don't fix it. I think $1.49 base price is too much for an electronic book download (because it's too big a fraction of $5.00 and I think few if any book downloads can reasonably be priced beyond $5.00); but if it were just the pricing, I might even continue to use Lulu for print-based future projects (on which the pricing hasn't changed).
However, it's not just the pricing. DRM is pretty much a show-stopper issue for me. Lulu is not requiring me to use DRM, but they're offering it to me and trying to sell it to me as a desirable thing. That's not the behaviour of the kind of outfit I thought I was signing with, when I signed with Lulu a few years ago, when they were endorsing Creative Commons. Right now I'm leaning towards taking all my print-on-demand business elsewhere.
Interesting hypothetical question: my current book project is intended for professional publication. Leaving Lulu is a lot easier than leaving a real publisher. If I manage to sell Kaago, there's a good chance the publisher will want to do an "eBook" release - especially given that that may be a year or two down the road, and the current rapidly-evolving technology will be that much more mature. And if a publisher picks it up and wants to do an "eBook" version, there's a good chance they'll want to put DRM on it. The only way I could stop them would be to instruct my agent to insist on a "no DRM" clause in my contract; and doing that would probably make it impossible to negotiate a publishing contract at all, because most publishers will not negotiate their standardized electronic-rights clauses under any circumstances. Authors with a lot more bargaining power than I have failed to get exceptions on that kind of point. Maybe vetoing DRM would cost me the possibility of "eBook" publication; more likely it'd cost me professional publication entirely. Will I really commit to taking the stand against DRM in that way? I don't need to answer that question today, but I will need to answer it soon.
UPDATE: Lulu have posted an entry about it in their Web log. They briefly describe what DRM is, and they say you might or might not want to use it. They link to an article by Tom O'Reilly on openp2p.com, in which he points out that piracy of electronic books really isn't a big deal anyway. I am unimpressed. This isn't about whether I'm informed about what DRM is and how well it (doesn't) work; suggesting that that might be a significant part of the issue (which they do all the way from the title of the piece) is an insult to my intelligence; and I note that they acknowledge absolutely no ownership of the problem themselves. It all has to be about whether we, reading the article, know what we're talking about. Although this posting has gone up on their Web log, which few people read, the front page of their site where they advertise "copy protection" hasn't changed at all. It appears that none of their actual behaviour in terms of trying to sell DRM to their customers has changed in any way in response to the community's concerns.
See the discussion of apologies we had on here a while back - Lulu is not purporting to apologize here, and that's a good thing, but they are certainly attempting to distance themselves from any responsibility for the situation. They're presenting DRM yes/no as a debate that exists in some outside world far away, with them as impartial observers just empowering you make your own choice freely. That doesn't work when they're advertising DRM as a product and trying to make a profit from it. It's like trying to run an abortion clinic without taking a position on abortion. You can't stand outside the controversy when you're participating in the action.