No, this is wildly smart and financially savvy. It's a great use of advertising budget dollars. They could spend millions on advertisements, or pull you in with a door buster deal.
1. It pulls people into their MP3 store, many for the first time. Now they see how easy it is to buy there, cheaper than iTunes mostly ALWYAS anymore.
2. Giving the first year of Cloud service again inducts a user in the service, and when their $20 renewal arrives it's money in Amazon's pocket.
3. The Amazon MP3 store with the Cloud Drive could lure people out of itunes. Imagine people who work in office settings that are maybe allowed to ahve music, but don't have thier itunes at work. Cloud Drive... one of the few practical reasons I can see people using it.
I also think the record label knows what a stinker this album is. It's ok, mostly filler tracks and pales in comparison to the first. They've done everything from promoting it in Farmville to giving a track a day away... I bet Amazon is getting an incentive to do this as well.