Stephen King's novella UR will be available exclusively on Kindle for at least a while as part of the introduction of Kindle 2. Mainstream content by famous authors is unlikely to stay exclusive to the device, but this marketing approach gives a hint of what's to come. Many of us will "need" Kindles either because the content we want is available on them first or because Kindle – and perhaps a set of Kindle-compatible readers – are the only place we can get certain content. Physical books won't die away – especially because they can produced without huge inventory cost using print on demand (POD).
This is partly wishful thinking on my part. I'm hoping that Kindle and devices like it will become an alternate road to publication for new authors and will diminish the gatekeeper function of mainstream publishers. Hits, in most cases, will still require clever marketing, celebrity, and/or luck. Chris Anderson has written famously about how Amazon's "endless shelf" supports the long tail of books which would otherwise be out of print and out of distribution because they didn't make the sales cut for brick and mortar book stores. It makes sense that Kindle and the like will support an even longer tail – books which never would have been published at all except that they can be published and distributed at almost no cost (except the writing!) because they're only published electronically.
Some reference books will simply change to a subscription model so they can be kept ever-current. Cruising guides come to mind because we need to be able to access them even when we're not online but also would like them to be up-to-date.
Extremely topical books will come out first or perhaps exclusively for e-readers since they're need in a hurry but quickly become obsolete.
And books like UR which are lunched with hit power will trade short-term exclusivity for launch publicity. You gotta have a Kindle if you want to be first on your block to read UR.
Perhaps because of production and cost bottlenecks, Amazon is not now aiming the Kindle at the long tail of book publishing. There are many less books, just 230,000, available in the Kindle store than there are in Amazon's marketplace for traditional books. My blog Fractals of Change and my book hackoff.com: an historical murder mystery set in the Internet bubble and rubble are both available on Kindle. I could only make the novel available for Kindle because it already was carried on Amazon as a "real" book; I'm not quite sure how the blog was chosen. Amazon solicits me for marketing and co-promotion opportunities for the traditional book but I haven't yet found out how to do direct marketing to Kindle owners (just asked Amazon). My short story "The Interpreter's Tale" is available as an e-book for downloading from Amazon to a computer but not for Kindle. At some point Amazon'll make this all come together but it hasn't happened yet.
Amazon will eventually have to decide whether it is a device provider or a content reseller. As a device provider, it makes sense to keep the price of the now scarce Kindle high at $359. But a content reseller would want to take razor and blades approach and make the reader cheap or even license the technology liberally to increase the audience for downloads. Tough decision because success would then depend on being the place where author's "publish" and readers search. There isn't much cost to publishing in multiple places. In the physical book world, Amazon has managed to create and expand a position as THE place to find the book you want. For authors today, if your book is going to be carried in only one place, you want that to be Amazon.
My bet is that Amazon will eventually decide to expand the market and take the price of the reader down – especially if it sells in high enough quantities at today's price to lower the cost of manufacture. But this is NOT what Amazon elected to do in yesterday's announcement; they followed the practice of the electronics industry by using lower component costs to increase capability rather than to lower price.