Amazon's Bezos Explains How It Makes Money While Keeping Prices Low - Tricia Duryee - Commerce - AllThingsD

"Special offers" included by default -- also see All new Kindle Fire models are ad-supported (The Verge)

"Is the price of the Kindle Fire HD with LTE ($499) subsidizing the data plan?
Bezos: I’m not going to break out the economics of any particular piece with you, but you’re right, it’s an astonishing price point.
How does special offers, or the advertising, play a role in the price point?
We had it on our E-Ink devices, but haven’t had it on the Kindle Fire. For those, it’s very good, no one really buys the non-special-offers version. Everyone buys the special-offers version. There aren’t two versions of this (pointing to the new 7-inch Kindle Fire HD). That was a decision we made because no one is willing to buy the non-special-offers version."

Amazon's Bezos Explains How It Makes Money While Keeping Prices Low - Tricia Duryee - Commerce - AllThingsD