[fjtorres]

Amazon is, to a certain extent, expanding into a vacuum as most of the old-school publishers are still working off an outdated business model built around regional rights/batch printed treeware/high overhead-low royalties.
Given Amazon's broad distribution reach they can minimize overhead and maximize royalties and distribution at a time few traditional publishers are even *trying* to move to a similar model built around persistent availability of midlist/backlist titles rather than hit or miss new releases.

To put it another way: they're not really competing with the traditional publishers, but rather going after content the old school publishers deprecate. Where the traditional publishers still see print as their core competency and dream of a new release that will sell a million copies in a month, Amazon sees ebooks as the core of the business with print editions as a secondary revenue stream and dreams of titles that will sell 10-20K a month, every month, for years and years.

There *might* be room for both approaches in the market but I suspect the latter approach will garner a larger share of the market than the former in the long run. And, of course, focusing on the long run is Amazon's traditional strategy.