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So what am I missing? Is there some significant selection that is available at MobiPocket or other sellers, but not Amazon? Do I really need to care about this?
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You are not able to purchase DRM'd content from booksellers other than Amazon or checkout library books without your Kindle PID. This gives Amazon a monopoly on what you read on your Kindle, and allows them to raise book prices to whatever they wish, because there is effectively no competition.
Since using the KindlePID/KindleFix was a method of allowing Kindle users to obtain content from sources other than Amazon
without breaking the DRM, many people feel that it is unfair and heavy handed for Amazon to have taken this position. It's certainly not in "customers" interest. Perhaps we are also leary of where Amazon is going with this.