The very first sentence is the problem:
"Life, it turns out, is a series of tradeoffs between great experience and high convenience."
No, it isn't. By pretending this is a hard and fast rule to all things in life, the author has taken the mistaken position that no product can ever be a great experience and be convenient at the same time. We know from experience - the iPod/iTMS, the Wii, etc, that this is just clearly false.
The author then further fails to use even the most rudimentary logic:
"the entire e-reader market consisted of just 1 million units in all of 2008, and Amazon nabbed only a slice of it. By contrast, Microsoft sold about 1 million Zune music players..."
Using this flawless logic, we can also surmise that the iPhone is a terrible failure - just think about how many non-smartphones Nokia sold last year! The iPhone only sold a fraction of those last year! Not all markets are built the same. There's no reason to believe that the Kindle wasn't a huge success in its market. The problem with the Zune is that it failed to capture even a tiny portion of its* target market - this comparison is completely invalid.