This is exactly right. $400 is a lot of sub-$10 paperbacks that you can’t loan to friends or give away. This kind of permanence and ease of transport lends itself to some segments and not to others.
The ideal launch market for an ebook reader exists; it’s college students and academics. They’re used to paying over $1000 a year for textbooks and often up to $100 for a single book. The books are big and heavy and they need to carry them around. The books go out of date — an ebook reader with an online subscription service for correcting errata and adding supplementary material would be perfect. If Amazon had designed their hardware a little bit differently, then stitched up a deal with Elsevier and the other big publishers of peer-reviewed journals and textbooks, they could have rented pre-loaded Kindles out to students for $1000 a year and shifted container ships full of the things on day 1.
But instead of designing a device that will allow college students to carry all their (expensive) textbooks around in a single notebook-sized package, Amazon seem to be going after the consumers of (cheap) popular literature and fiction. Readers who are unwilling to spend much more than US $7 on a mass-market novel in the first place, and very unlikely to read more than 100 titles per year. And then they’re expected to put up with intrusive DRM that devalues their purchases, intrusive privacy-invading monitoring, and (to add insult to injury) a $400 entry price before they can join the party. [From Why I don’t like Amazon’s Kindle]