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I agree that Amazon probably knows what they're doing. Amazon is Internet Walmart. The article seems to say, "Walmart is selling razors and razor blades for less money than the mom and pop store! How can this be a sound business strategy?"

More than that, eBooks have no marginal cost outside of the royalty they negotiate with the publisher. If they make Kindles super cheap, and make eBooks super cheap, they own the book market. If they own the market then they can dictate royalties to publishers. ("We've decided to sell your book for $10, so we're going to pay you an amount that makes that retail price profitable for us. Or you can sell your book at Borders... oh wait.") Then they can keep selling eBooks for $10, and do so profitably by paying publishers less. Like I said, Internet Walmart.

Amazon is Internet Walmart.

Or in other words, Amazon is the ultimate middleman. It's not about ebooks. It's about making Amazon the most frictionless way to buy anything.

If they own the market then they can dictate royalties to publishers.

If they own the market, they can disrupt the publishers. If I were Amazon, I'd be creating software infrastructure to enable serious businesses to create and market curated collections of content because that's all publishing is in its purest form, be it books, music, or whatever. Distribution is plumbing, and why would someone choose to compete with Amazon on that front?

They already have that. www.createspace.com. It's an Amazon subsidiary.

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