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Just as Amazon spurred the uptake of digital books and newspapers with the release of the Kindle e-reader, so it aims to sell even more electronic content by extending its reach to new devices. According to internal sources quoted by The New York Times, the giant retailer's R&D unit, Lab 126, is developing new devices, including a possible smartphone.

Some of these may be prototypes for demonstration purposes or for license to partners, but Amazon's aim is clear - to make its integrated store and immersive reading experience the dominant platform for electronic reading, therefore boosting its content sales. It has already pushed the Kindle app to a wide range of devices and extended the choice of its dedicated e-readers, with new low cost and Wi-Fi options.

Now the NYT report says that Lab 126, which was responsible for the Kindle, is considering new hardware that could give consumers easier access to digital books, music and movies. Lab 126 has recently posted job adverts for a hardware and RF engineer.

The source said Amazon CEO Jeff Bezos originally wanted the lab to "build a range of other devices … There was talk of music players and other electronics." A phone was considered "possibly out of reach" but not ruled out altogether.

Some observers think Amazon will go further in reducing the price of the Kindle e-reader to encourage uptake and book sales. It is widely expected to push future models below the magic $99 level that triggers a mass market, but Dale Calder, CEO of machine-to-machine firm Axeda, thinks it will eventually offer the devices for free. This would be like the smartphone subsidy model, though with the retailer rather than the carrier offering the deal. A free device would possibly accompany a subscription or a minimum content purchase commitment, or Amazon might just assume a free gadget would drive purchases. The economics would be better for the retailer than for a cellco, since it controls the whole supply chain.

"The world of products is dead as we know it," Calder said. "It's all about services. And trust me, they make a hell of lot more money on the service than they do the hardware." Axeda itself gives away wireless hardware for healthcare but charges a fee for every recordable event transmitted by a hospital, he explained in an interview with ConnectedPlanet.

Some analysts have already calculated that newspaper publishers could profitably give away e-readers with digital subscriptions - it would cost less for Rupert Murdoch's News Corp to give away a Kindle to every New York Times subscriber, along with a one-year deal, than to print the paper, for instance.

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