I could see this doing pretty well for Amazon... But I have a problem with an Android tablet that doesn't have access to the Android app store. How is Amazon going to fill up their 3rd party software pool to give more variety and universal appeal? The diversity of apps is one of the big consumer pulls for the iPad and regular Android tablets, yet Amazon has walled themselves off from the already-established content out there. Are they going to try to woo developers to their "Android but not Android" platform? Or re-publish existing Android apps and sell them through the Amazon app store? And how is Google going to handle that?
Seems like Amazon may end up adding fuel to the "fragmentation" arguments against Android, by seriously splintering the app libraries.
The Fire - according to an article I read earlier - is a loss leader to the tune of $10 per unit for Amazon. This puts - for $10 - a device into the hands of probably millions of buyers who will tend to purchase audio and video products from Amazon - like the books on the Kindles. I for one have not purchased anything beyond a book on my Kindle. But I have purchased about 40 books that I never would have without the device -- and it has become a preferred method of shopping to boot.
With the Fire, my buying opportunities are vastly enlarged (the magazines alone would attract my attention on the color format). Also this price point for me is inexpensive and I can return it if I hate it or find it irrelevant -- or give it away if an when Amazon upgrades to their next tablet. The $500 plus price point on the iPad is a bigger commitment and I would feel pretty crummy if it should disappoint.
I've been tempted by the Kindle for awhile now - my family reads a lot, and those who have a Kindle absolutely swear by them. I've held off. Now the Fire, with its color screen and at a price not out of reach for a retired guy who's watching the thieves in congress once again target Social Security while demonizing old people who put part of their pay into the fund all their lives... even with all that, Fire's price is hard to resist. I need to see more about the hardware and its capabilities, though, before I buy. For me, $200 risks more than just disappointment with a new toy.
I don't see not having access to the Android Market being a problem. The Amazon app store pretty much has everything you would want and helps filter out a lot of the garage that is on the Android Market. I have mine on pre-order, but I am still planning on keeping my current kindle (3rd Gen).