Amazon losing money on $9.99 e-books | TeleRead: Bring the E-Books Home: "Amazon has to pay the same wholesale price to the publishers for e-books as for print editions of those books—more or less half of the print edition price. (So do other e-book vendors; this is why even Fictionwise must charge excessive rates for books from publishers such as Random House, though they do they best they can to bring the prices down with discounts.)"
Wait the idea is to give away the razor and sell them the blades, not the other way around. I think someone just failed their Marketing 101 class. Not that they should give away Kindles but they could drop the price way down. The loss-leader is supposed to be the hardware not the content. I still think that idea of the newspapers offering a free Kindle with a year's subscription would at least forestall the end of the newspaper. I saw that the New York Times is working on a ereader of their own but they don't have a lot of time left, just use the Kindle to stop the bleeding.
Amazon also just announced that they are going to be publishing books on their own under AmazonEncore. Actually what they should do is offer an Apple App Store split with authors who sign up for that for the Kindle version, a dead-tree version would be different of course. They would be flooded with authors and books and that is fine Sturgeon's Law holds in any case, most of it will be junk but so is what we have now. But Amazon makes it a lot easier to find in their store compared to the App Store so they have the advantage.
Sure the other publishers and the Author's Guild won't like it but when you realize that you can't win the game you are playing you just have to change the game that is being played.