But, unlike consoles, provided a kindle doesn't need the latest, fastest technology, they can keep getting cheaper, til it's negligible relative to the benefits of acquiring a customer.
The company that uses the revenue model of making money of the device and selling the content for a negligible profit is Apple. That's how they run the iPod department for one. Devices are sold at a high margin but almost all the revenue for itunes sales go to the content providers.
If it was viable to charge more money for the device, I'm sure they would but they need those (or some other) devices in people's hands. Therefore, they can't charge more for the device. That is my point, they don't know how to make more money with it without totally changing their strategy.