Amazon to offer Library Lending to Kindle through Overdrive
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As far as the potential for format fragmentation goes, it's still the wild west as far as the relationship between libraries, publishers and e-books go.
Said money redirects - eventually - into the coffers of those who are the creators.
If there is no scarcity, then there is no incentive to give creators besides your personal ethics.
Supply/Demand/Price curve. If supply is infinite, then price goes towards zero.
If price goes towards zero, then no one gets paid except by sponsors/patrons[1]. Are you sure that's the world you want writers and musicians to live in?
--- [1] Do you want those sponsors to control the ideology spoken by artists?
If by the music industry you mean musicians, the common understanding seems to be that more and more musicians are relying on revenues from public performance. This works for music because people like to see it performed live and are willing to pay for tickets.
It's not clear how writers will make money. Public performance is probably a reasonable route for David Sedaris and a few others. There are probably a few who can do the Amanda Hocking thing. And the Kickstarter model may work for some.
If they throw a full functioning OS, like Android, on the next Kindle, keeping it at it's current size, I'm all there.
EDIT: Well, that might not be true about HC. But libraries would hit their limit a hell of a lot faster with Kindle users added to the mix, so they'll be really motivated to continue boycotting HC's e-books.
More most reading I prefer having a book, and every so often I look for something in my local library and find they only have some electronic version.
I need to start showing up at my local library meetings.
edit:
For the purpose of working to bring e-books to our local library system.