It appears that the Kindle has limited MP3 capabilities, but I don't own one so I can't speak to it directly.
"What I am suggesting is a low-cost, high-quality device (like the Flip camcorder)."
Here is my guess as to why Amazon does not rush into that:
a) Kindle, as you'll recall, was very early to the market for book readers. As a consequence, Amazon was able to negotiate sweet deals for content. With MP3s, that opportunity to take an early lead in available content is gone.
b) Consumer mobile is very tricky and there are lots of very large guerrillas crowding that room. Why don't Flip camcorders come with MP3 players? Why doesn't Cisco make a cheap, high-quality MP3 stand-alone player? etc. Amazon doesn't appear to be "tooled up" for that - it doesn't have the in-house expertise (yet?!?) to justify too many risks in that space.
c) Ok, Amazon comes out with a player, let's say. It has to be pretty darn low per unit margins or else it can't compete. That means R&D and start-up costs will take a very long time to recoup (if they ever can be). All of that is OK if somehow this increases Amazon's sell of digital audio files.... so, how do you see that happening? (I don't.)
d) Why don't you make that sweet-spot MP3 player and offer Amazon exclusive right to sell it based on a wholesale price that gives you a comfy profit (or at your costs but with some kick-back on music sales). If you can't do that (given financing) - then neither can they.
"Why don't you make that sweet-spot MP3 player and offer Amazon exclusive right to sell it"
You just had to throw down the gauntlet, didn't you? :)
Also, see http://techcrunch.com/2009/10/06/doubletwist-unveils-an-alte...
For MP3s, there's already great players to sell music for.
1) High-priced, high-quality devices (iPod, Zune)
2) Low-priced, low-quality devices
What I am suggesting is a low-cost, high-quality device (like the Flip camcorder).