Unfortunately for Amazon, selling other people's content is far less lucrative than selling your own high-end devices. I'd venture to say that their only way of making a sustainable/profitable business is some sort of ad-supported model.
Many people keep holding up the videogame console model as a way to beat the iPad - sell the hardware at a loss, profit from software and licencing - but it doesn't work in the era of $1/freemium megahits and ad-supported web apps. Trying to make money off of movies/music/books is even more difficult. Piracy will always be easy and the competition among middlemen (Rdio, Spotify, Google, Apple, Netflix, the content companies themselves) is even more cut-throat than the software platform business.
Many people keep holding up the videogame console model as a way to beat the iPad - sell the hardware at a loss, profit from software and licencing - but it doesn't work in the era of $1/freemium megahits and ad-supported web apps. Trying to make money off of movies/music/books is even more difficult. Piracy will always be easy and the competition among middlemen (Rdio, Spotify, Google, Apple, Netflix, the content companies themselves) is even more cut-throat than the software platform business.