Many were surprised with the announcement of the Kindle Fire's price by Amazon's Jeff Bezo. It was speculated that the device would go around $250 to $300 but it actually went $199. So what is really happening?

Not many know that with every Kindle Fire, Amazon is taking a $50 hit in manufacturing cost. You might be mistaken to think that Amazon is being generous for that but when you buy a Kindel Fire, you are basically buying a means for Amazon to exclusively sell to you for a device you own. It is not only because of HP selling the Touchpad at a discounted price of $99. That is not all.

You have a free connection with Amazon's amazing servers but what you still haven't notice is that you need to buy the next Kindle device after another if you still want access to those files. Congratulations, Amazon just got a monopoly on your data through the only means of accessing them.

Speaking of data, you also hand to them your purchasing data. The information that is regularly exchanged with them would make Facebook drool especially with their Amazon Silk.

It would be browsing behind a proxy and that proxy would be Amazon's servers with every website you visited by you seen by them. And you thought everything you browsed would be between you and your ISP. Now it would be between you, your ISP and Amazon. It would be no surprise that Amazon would have in their Kindles advertising geared towards you.

There is also the matter of the 30-day trial for Amazon Prime. It is sort-of a gateway to purchasing more from Amazon with its free 2-day delivery. Why is it free if you have to pay $79 a year in the first place? Most of all, Amazon Prime subscribers have been proven to purchase more than regular Amazon customers.

Other tablet manufacturers make money out of the purchase of the tablet itself. Amazon, Barnes and Noble, and Apple make theirs from additional purchases that will accompany the customers purchase of their device in the future. So don't go crazy so much about how the Kindle Fire is so affordable.

This article is by no means saying that Amazon is being underhanded because its services is by far excellent. Continuing on their course with the Kindle, they might even have e-books become more affordable due to their hold on the distribution as they can dictate the price.