I'm surprised that no one has made this point yet, but in your original post you talk about the $99 iPhone. Well that $99 iPhone has free Kindle software available for it, so for $0 you can begin downloading Amazon's ebook. That is part of the reason that Amazon hasn't seen bigger drops in it's Kindle pricing, it has given you millions of other ways to buy it's books that have no upfront costs. Everyone with a Blackberry or iPhone or iPad or iPod Touch or Android device can buy books from them. They will be happy to sell Kindles all day long, but their main motivation has been to own the ebook market for the long term. That's part of the reason that they stopped with only two base models of Kindle, they aren't going to go after every niche with an expensive piece of hardware, let other manufacturers do the heavy lifting for them, they'll be more than happy to keep selling you books!
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