Apple didn't start out with a curated store, they started out with "open" HTML5 apps that couldn't do shit.
Today, Apple barely can do quality control on the iOS store, Google essentially doesn't bother, why should a small shop deal with the issue right off the bat?
Remember all those feature phones with a plethora of custom operating systems? Almost none of the users cared (or knew) what the OS was. This is an OS for that kind of device. Nokia is shipping it right now.
How do you define success? This is not a competitor to iOS/Android, it's for cheap low-end devices, which is still a sizable market. Try running Android on 256MB of RAM...
It's a good way to not get developers on board. Yes, you can easily develop for iOS/Android and as a result the respective stores are drowned in crap. Merely publishing on there will give you zero visibility. On curated platforms, there's the benefit of being a big fish in a small pond.
"Once this is done, they can entrench themselves and raise prices"
If that strategy really worked in the long run, you would see countless examples of it. So called "price dumping" can actually be illegal, but it rarely needs to be enforced.
I wouldn't be surprised if the shareholders eventually got their way and have Amazon split its profitable businesses (like cloud infrastructure) from the unprofitable ones.
Amazon has been consistently losing money on retail since its inception. If they raised prices, they would lose their dominant position. The main reason you don't see more competition is that retail (online or offline) simply isn't very profitable to begin with.