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This could work, whether or not it is (as I think) ugly as sin. Much depends on what sort of DRM is built into the system, and who imposes the DRM: Amazon or the publishers. I've already made the promise to my readers: No DRM of any kind, ever.
On the other hand, it's still unclear what publishers will have to do (or more to the point, pay) to get titles into the store. That matters a great deal too.
$400 is a lot of money, so the public may not be as nuts about the damned thing as we gadget freaks are. Let's watch.
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