I love that mat, wish I could buy one. I did misunderstand, I thought you meant that the $15/month subscription was a locked-in contract for the wireless access or something.
Your $200 + $15/month newspaper subscription idea for the Kindle doesn't quite make sense, however. Amazon isn't taking $15 clear profit from a newspaper subscription, they are giving a significant chunk of that $15 (probably at least $10) to the newspaper.
So if Amazon is making $5/month subscription profit, then they would need you to subscribe for 5 years to make that $500 total. Longer if you take into account the reduced value of the future cash flows.
Amazon would have also significantly reduced their cash flows from customers who were willing to pay $500 up front + $15/month.
Amazon isn't going for the average customer yet, I doubt that they can produce the device cheaply enough yet- give them a few years and they probably will try for these customers.
I shouldn't have said that you couldn't afford the media, what I meant was that Amazon is trying to get the Kindle into the hands of people who are willing to pay for the media. People who currently subscribe to newspapers and buy a ton of books think that this new device is superb, being able to buy a new paperback every week instantly without wasting time going to the store to find that it has sold. Friend tells you about a cool book they read... and 60 seconds later you're reading it. If you (or I) don't care about these features then we are not in the target market.
The best business plan isn't always "get the product into the hands of as many customers as possible". I won't be buying a Kindle, but I think that they're a cool device for the purpose that they serve and I can see why other people would want them.