This makes sense because the product is free so of course it would need to be supported by ads. Oh, wait...
I'm not paying for a product with ads (especially intrusive ones) in it.
What Amazon did was say the following: "You can buy our hardware, and deal with the ads. You can pay us even more money to get a better experience."
That is a bad message for subsidised hardware. The real cost is hidden behind a 'pay us more money for a better experience'.
Instead, what they should have done was say the following: "Our hardware costs $X, but you can get it even cheaper if you agree to minimally intrusive advertisements!" And on this route, you can also offer the option to 'buy' off advertisements as well. Make this part easy. Don't piss off the user.
They should have turned that negative into a positive. Make it the users choice to opt in to ads.
I never said the Kindle should be free. I see no issue with paying for it, and I even pay extra for the ones without ads. This is because, as I said, I do not personally want to pay for a product that also contains advertisements.
Ever bought a paperback book? They all come with adverts for other book at the back, loose-leaf inserts etc.
The concept of partly subsidizing the cost with additional advertising is hardly a new business idea. It would seem almost impossible to never pay for a product with ads as you claim.
BTW can we drop the sarcasm? Doesn't seem like there's any reason you can't sell a product subsidised for advertising.
Dying industries are usually doing things 80% or 90% right - otherwise how did they become the powerhouses of old? But it's the 10% or 20% that's changed from their heyday that's killing them.
I don't even have an opinion of ads on the Kindle Fire. I just think the argument you're making is fallacious.
It was still a bad idea not to have an option.