I emailed Amazon (which own Audible now):
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Was there a decision on opening up the file format for Audible audiobooks? Will you publish a tool to compile mp3s into an AA file?
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At this time, there isn't a software option to convert MP3's to Audible formats released by Amazon.com. This may, however, change at some point in the future. Naturally, we want to keep up with technology and customer suggestions at the same time to improve our customer experience.
I've passed your feedback along to the Kindle business team.
We will definitely keep your suggestions in mind as we continue to make Kindle a successful product.
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@HarryT, @JSWolf: Nate nailed the issue. The mp3 player on the Kindle is super primitive (play/pause).
I'm eagerly waiting to see if Igorsk manages to put custom applications on the Kindle (java "booklets").
If he solves that problem, then I could write an alternative audiobook application (based on mp3s instead of audible files), if there is no way to convert from mp3 to audible.