Jeff Bezos stated this explicitly during the presentation - Amazon wants to make money when you use the device, not when you buy it. So they sell the Kindles at a very aggressive price in order to get you into the Amazon ecosystem. If you're already there, they're not going to make much, if anything, if you upgrade.
Which is why it's odd that they seem to abandon their older devices the moment new hardware is released. You can't report passages with errors in them on the KK for instance, because that feature only exists on the Kindle4 devices.
It's possible that the new software couldn't be ported to the older hardware of course, and keeping multiple lines of software current takes more developer resources, but if Amazon doesn't want people to upgrade, then turning their hardware into abandonware seems like it's a counterproductive move.
Amazon makes a virtue internally of doing everything 'on a shoestring' supposedly, this is probably just an external reflection of that I guess.
Yeah, this is a good point. It's long seemed to me the incentive for Android manufacturers is not to provide retroactive upgrades (and only helpful for Apple insofar as it is a competitive selling point).
Amazon seems the opposite; good software updates would make your old device feel new (just optimize speed and bugfixes, if nothing else). That would prevent people from upgrading to such "cheap" new models.
On the other hand maybe they expect to sell an order of magnitude more devices each generation. Also, depending whether the old devices end up in desk drawers or new users' hands it might all work out.
They've still pretty much abandoned the K2 & DX users, but perhaps the userbase for those is so small it isn't worth supporting them: it would probably be cheaper to just send them all new Kindles, but I doubt Amazon will do that...
