From business perspective right and nothing new: printer manufacturers, video game system manufacturers, telcos and many more do this for years—building a base where they earn money when people using their stuff rather than buying the initial setup.
From user's and ecosystem perspective it's wrong and leads to bad user experience: proprietary and closed systems, gatekeeper controlling the 'market', limited to no competition within the proprietary ecosystems.
I don't want this and look back at that days where businesses made money from selling systems following or creating open industry standards.
Noone's stopping competitors from launching platforms with open standards. The only factor is the content producers/app developers will go to where the most money can be made or where they can reach the largest audience.
The users will ultimately go where there's the most (or best) content/apps.
So the business models of the producers is the deciding factor.
And for an example of this look no further than Nintendo - selling a hardware platform (Wii, DS) on razor thin margins, but selling the games at a significant markup. Their inability to compete with the low priced smartphone apps is a big challenge to them.
An interesting development in the tablet market, but hardly a new business strategy.
Cell phone companies have done this for years. Cheap iPhone + high monthly contracts with 2 year lock ins.
But before them, video game console companies did it. Sell console with razor thin margin (or in XBox's case, at a loss), and make it up by selling lots and lots of games.
But before them, Gillette (and others) perfected and honed the idea by practically giving away razors and then selling you the blades. I got a Mach 3 in the mail days before my 16th birthday (which is another story of amazing data mining in the 1990s), and they've hooked me into buying those stupid blades for the last 15 years.
Bezos is no idiot. He's applying well known business models to his market now that he knows he can achieve the necessary scale.
The problem with the complimentary goods model is that it depends on a certain amount of proprietary between the complimentary goods. But what happens when someone makes a complimentary good that is interchangeable, and breaks the proprietary; and then undercuts your price.. You are screwed racing to the bottom of profit margins with a competitor, and then you have 2 items which are low margin.
It depends on either proprietary lock in, or a service integration so good that you don't want to buy the content anywhere else.
I'm perfectly capable and willing to pirate any ebook I want to read, but most of the time I just buy them in the kindle store because it is so much more convenient. Amazon doesn't have to race to the bottom on content pricing because their services have value.
It may not be the case that services are the end game, but rather that there is a trade-off due to organizational structure and capital investments needed to sustain a product-focused company vs. a service one. As revenues from one type of model dry up (e.g., majority of people have your product), the investments needed to sustain that type of company structure have less marginal value or may even be a drain. Simply put, there are always diminishing returns to any strategy and there may exist a middle ground that maximizes revenue.
Related to topic, Professor Cusumano at MIT wrote a good paper covering this exact topic back in 2008 which covers additional historical cases dating back to the 90's. A lot of what is happening now follows logically from that analysis.
From user's and ecosystem perspective it's wrong and leads to bad user experience: proprietary and closed systems, gatekeeper controlling the 'market', limited to no competition within the proprietary ecosystems.
I don't want this and look back at that days where businesses made money from selling systems following or creating open industry standards.