I don't think Amazon would have a problem with dropping the DRM. Amazon sells books without DRM. I think the problem is that Publishers want the DRM because they think that it protects the books.
They are probably right. I am going to guess that maybe 10% of the e-reading population knows that it is possible to strip DRM and convert formats. Probably 50% of that 10% use that capability.
Most folks will buy from the most convinient store. For the e-reaers tied to a store it makes sense to do so because the store maintains an archive of your books for you. I doubt that Amazon would lose a ton of business if they did not DRM books, they might actually pick up business if other e-readers read their format, think of what happened to sales at Amazon when the IPad was released.
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