It began as a simple online bookstore, but Amazon has grown into the largest online retailer of a wide array of goods, from electronics to toys to groceries. We spoke with Amazon founder and CEO Jeff Bezos about how the company is helping forge new markets for digital media, including music , videos, and downloadable books for its Kindle reader. Excerpts:
The Kindle was a departure for Amazon. Was it a significant step for you and your team to design and manufacture a stand-alone product?
Companies can extend in at least two different ways. One, they can take an inventory of their skills and then they can say, "OK, with this set of skills, what else can we do?" That's kind of a skills-outward approach. Another way is to start with the customer needs and work backwards. Given our customers, you can say, "What needs do they have that we could fulfill, even if it requires us to develop new skills?" Kindle is an example that's firmly in that second camp. We have a large base of customers who love reading. How else can we make reading even easier for those customers, even if it requires us to develop new skills? We certainly had to go out and hire people who had expertise in hardware design, hardware manufacturing, and so on. If you're going to start with the customer and work backwards, even if it requires you to develop new skills, you certainly have to have a long-term orientation. We started working on Kindle more than four years ago.
Are there other hardware products in the pipeline?
>We're really focused on Kindle. Kindle has really surprised and excited us. We have much more traction at this point than we expected to have. We're now up to over 190,000 titles on Kindle. That is double the number of titles we had at launch. More than 10 percent of book units we sell in that universe of titles is in Kindle format. We took 14 years building our physical books business. To have more than 10 percent of unit sales already being Kindle format where we have both Kindle version and a physical version is pretty astonishing to us. In its first version, is Kindle a better experience for someone who wants to read a book than a conventional book?
Yes. Our design objective for Kindle was to make it a better reading experience than a physical book. That was a very challenging design objective. The book is an object that has resisted change for 500 years. Anything that resists change for 500 years is going to be difficult to improve on. There were the technologies that we brought together—the electronic ink display together with 3G wireless. Then there was business innovation on top of that—making the wireless plan free, so you don't have a monthly data charge, and bundling the cost of the wireless delivery into the cost of the book. You might buy a New York Times bestseller for $9.99 and it gets delivered to your Kindle in 60 seconds. You don't have to go find a Wi-Fi hotspot. It's very simple.
Once you use Kindle for a while, you realize physical books aren't as convenient as you once might have thought they were. Consider when you lay in bed at night reading. My wife is always hopeful I'm going to read my Kindle and not something on physical paper because it doesn't make any sound when you turn the pages. You can read Kindle with one hand. I can't read a book with one hand. You can get a new book in less than 60 seconds with Kindle, which I can't do with a physical book. If I come across a word whose meaning I don't understand, I can right there on my Kindle look up the meaning.
Once you get accustomed to Kindle, it's awfully hard to go back.
Can the Kindle be more? Can it, for example, also be a media player?
We're very focused on making Kindle a purpose-built reading device. Reading is important enough that it deserves a purpose-built device. How about Amazon's other download services—the MP3 store and video download store. How important is the business of digital media to Amazon?
I think it's very important. Obviously, we still have a big physical distribution business of music CDs, DVDs, and a very meaningful Blu-ray, high-def business. Those businesses will continue for many years. But if you look out far enough out into the future, it makes sense for these products to be distributed digitally.