I cringed a bit when the article mentioned that physical goods built the business case for Amazon selling the Fire at cost. I find it very difficult to believe

I cringed a bit when the article mentioned that physical goods built the business case for Amazon selling the Fire at cost. I find it very difficult to believe that Amazon was banking on Fire customers purchasing significantly more physical goods; by that same logic, Amazon should get into the laptop business - do you see that happening? More realistically, Amazon quickly realized that the tablet is largely a consumption device for high margin content. The lack of a keyboard and touch, along with other design differences, makes the tablet relevant for consumption. Also, Amazon wouldn't have built a closed app and content store system if they thought that physical goods would be the bulk of the business case. The Fire is part of Amazon's push to ensure that as virtual content sales explode, they get the bulk of the pie. This is exactly why Google has built the Nexus 7 - to get on the bandwagon for virtual content. If they sell a lot of Nexus 7s - they will definitely be upping their content portfolio on Play.