Yes, the industrial design is strange. But that is actually the smallest part of the business play. What Amazon is really betting on is the revenue model of the content. This attempts to piggyback on the Ipod model, but with some deeply flawed differences.
 
The Ipod built a community through it’s sensitivity to the excesses of peer to peer copyright abuse. Itunes software allows you to both buy music from the music industry and rip your own off your existing cd’s. Unlike any media before it, the user does not need to replace their media. In the context of the music industry in 2001 this was a move that recognized the effect of internet community values in an unprecedented way. We should note that Itunes store sales have been disappointing to Apple and crushing to the music industry, so this is hardly a perfect solution. However, it has created a robust model for Ipod sales and won the acceptance of most users. This is a significant achievement in the face of free competition.

And it creates enough funding to improve the software and refine the business model, so it is self funding to Apple while it supports the now stratospheric [over 110 million] sales of the hardware. Fanatical open source cultists gripe that that it is a closed system, but the Ipod also supports playing non-proprietary mp3 music as well as Apple’s sonically advanced ACC format. The 12 to 26 year olds driving the bulk of these sales could care less what a bunch of wizened old geeks have to say.

The Kindle sets it’s standard by the existing competition - the Sony E-reader. The E-reader charges $14.99 for a book while the same text is $9.99 from Amazon. This seems like an obvious idea, except that nobody bought E-readers so the comparison is an academic business case. The E-reader also supports uploads, so you can go here [insert manybooks link] and get a fairly extensive selection for free.

Amazon requires that you purchase almost every piece of content that you put on it, or pay a ten cent tax every time you email something to it, which must happen through Amazon for word, rtf or excel documents you might want to read. The most egregious omission is the lack of ability to view a pdf. I suspect either an inability to negotiate a royalty deal with Adobe or too many books exist in pdf form already, thus eating into their proprietary scheme. The latter seems more likely than the former, but whatever, this is goofy.

What Amazon fails to recognize is the shift in values on the internet. Right or wrong, people assume that the content is free, and savvy content sellers have found ways to mix free with cheap to play to those expectations. Calibrating their business model to an irrelevant standard is unlikely to be successful.


A couple of notes...
Extensive comparison of Ipod managers. Most people see the Ipod & Itunes as a proprietary platform combination, but it can be seen as a hard drive with nice controls as well.
http://en.wikipedia.org/wiki/Comparison_of_iPod_managers

Here is a great discussion of NBC’s issues with Itunes
http://www.tuaw.com/2007/10/29/nbc-exec-slams-itunes-revenues-business-model/