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The main issue to me with the razor/blades analogy is that I don't think the margin is high enough on the books to outweigh the cost of the reader. A razor handle costs a few bucks to make and they sell me the blades at $15-$20 for a pack. The margin on those blades is huge. That model makes money.
The last time I saw a parts cost breakdown on the Kindle, it was around $140. That's just the hardware. Firmware, warranty coverage, distribution, etc.. all cost money, too. Let's say that's gone down since then and they could actually deliver the unit at a total cost of $150. Even at that low cost, they would have to sell a lot of books to break even. We already know that they lose money on the new releases and best sellers so it's up to the back catalog, periodicals and uploaded stuff to make up for that. We're looking at usually 35 cents to a few bucks revenue (not profit) on each of those. Even if they averaged a buck profit per sale of these non-loss-leaders (which I highly doubt) you'd be looking at having to make 150 sales in these categories just to break even. I think I've been pretty generous with all these estimates and it's still not doable. I don't think they're making much of a profit on the Kindle as it is but taking even a moderate loss on it would take quite a few sales to recoup since the books themselves are pretty low margin.
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