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May 21, 2009

Jeff Bezos and his team at Amazon have revolutionized the Internet and how we read with the Kindle.

By Jeffrey M. O’Brien / Photographs by Robyn Twomey

Amazon founder Jeff Bezos used the Web to shake up book retailing. Now, his company has invented the Kindle e-reader, and is using the Internet to sell electronic books, newspapers and magazines.
“I don’t want to oversimplify what’s happening in media. It’s very complicated,” he says. “But I find it hard to believe that the primary way of reading newspapers ten-plus years from now is going to be on printed paper.”
Not so modestly, he seems pretty sure that the Kindle will be this future.

Doing One Thing Very Well

The Kindle DX, the latest version of Amazon’s proprietary reader which was introduced a few week ago, is a remarkably unsexy looking savior for print-based media companies. The $489 tablet technically is portable, but at 10.4 by 7.2 inches, is too big for a pocket. It features a black-and-white display with a crippled Web browser, no video and not even a backlight.
But what it does, it does well. It downloads any of the 285,000 e-books available at Amazon.com in less than a minute thanks to a wireless 3G connection. The 9.7-inch screen is designed to favor the type of graphics-heavy presentation found in college textbooks or financial documents. Thanks to an accelerometer, the display can also be viewed sideways, broadsheet-style. And, it is remarkably easy on the eyes, even after hours of reading.
Simply, Kindle is a brash example of a single function trumping broad ambition.
Bezos likes to call his device the iPod of reading, but unlike Apple’s music player, the new Kindle has been met less with lust and awe than with hope and wonder. Could this rather plain-looking and pricey gadget actually pull off something so monumental as reversing the slide in book publishing and saving newspapers?
Kindle is sometimes referred to as an e-book reader. But that’s a bit of a misnomer, because even the original Kindle (which now looks clunkier than a first-generation iPod) was designed with all types of long-form narrative in mind. Newspaper subscriptions were available at launch (editorial content is delivered every morning by 4 a.m. for a monthly fee of up to $14.99), and they quickly rose to the top of the bestseller list, where they remain today.
The willingness of Kindle owners to purchase daily content should be an obvious lesson—the business is news, not paper—and further expose the foolishness of giving everything away on the Web.
What is Amazon’s interest in hastening the move to digital? “The math is compelling,” he says. “There is a genuine opportunity to make the cost structure of printing and distribution much more attractive.”
But Bezos insists it’s not just about the money: “we want to make reading better.” And he believes that making vast libraries and whole magazine kiosks both cheap and completely portable is what customers want—whether they know it yet or not.

60-second Man

Successfully bridging the gap between retailing (where Amazon has reinvented whole categories) and manufacturing a highly complex device (where Amazon has no experience) is rare. The skill sets are simply too different.
Moreover, most companies pursue linear growth, taking stock of competencies and determining where those skills might also apply. Tangential growth usually comes via acquisition. Doing it organically, the way Amazon favors, requires both vision and discipline.
Bezos says it’s the difference between doing what you can do and doing what you should do. “You can always do what you should do if you’re willing to put in the time and energy to develop a new set of skills,” he says. “If you only extend into places where your skill sets serve you, your skills will become outmoded.”
Ian Freed was lured into this culture to help Amazon think about wireless. Now a vice president in charge of the Kindle division, Freed has been involved in telecommunications for more than 20 years. When he was hired, the idea for Kindle was being bandied around the halls at Amazon, but nothing had taken shape. “I was Jeff’s TA when we first started talking about it,” says Freed, referring to a program where a hand-chosen exec shadows the boss for as long as 18 months.
“We discussed making it wireless, and that was the line for me. One of the dilemmas today is that, yes, you can get access to anything you really want—sometimes. But getting quality publications whenever and wherever really isn’t easy.”
It was a key insight. Running on Sprint Nextel’s high-speed data network, there’s no need to plug into a computer, the battery will last two weeks and there are no connection fees. And buying a book is a snap.
Freed considered slower connections, like a pager network or 2G, but ultimately determined that 60-second downloads would spur impulse purchases. See an interesting author speak on “The Daily Show?” You can start reading the book before the interview ends.
The plan has worked like a charm. For titles where a traditional paper and an electronic Kindle version are available, 35 percent of sales already come from downloads, Bezos says. That suggests Kindle owners love their devices, and that they’re buying impetuously.

Customers Rule

The Kindle business plan clearly borrowed at least one insight from Apple’s iTunes: consumers will pay for content when the bar is set low enough. New York Times bestsellers and most new releases are $9.99. But will what’s working for books work for newspapers, where the bar can’t be set any lower than the current Web standard of free?
At the DX unveiling, the New York Times and the Washington Post both announced test programs in which they’ll subsidize the cost of the device in exchange for long-term subscription commitments in parts of the country where delivery is not available.
But Kindle subscriptions alone—no matter how long the term—won’t save newspapers. The business is built on advertising, and as of yet there are no ads in Kindle editions. That might change: Freed says that “we want it to be a great customer experience if and when we introduce ads.”
Bezos and Amazon famously worry about customers, not competition. Proving the point, Kindle quickly blew past Sony’s Reader, despite Sony’s long history of success in consumer electronics. More formidable competition may be coming from the likes of Hewlett-Packard, Fujitsu, Plastic Logic and perhaps even Apple.
That prospect doesn’t seem to concern Bezos. Instead, he insists that Amazon’s number one job “is to listen to customers and then invent on their behalf.”
And he’s positive that, if he listens hard enough, Amazon will win.

Loose Lips Sink Ships

Amazon may be a public company, but Bezos is notoriously tight-lipped about details. Far from revealing sales figures or margins on Kindle, the company won’t confirm where the device is manufactured, what the revenue-sharing arrangements look like or whether publishers even know how well their Kindle editions are performing.
That leaves the analyst community guessing. One firm, iSuppli, puts the $359 Kindle 2’s materials and manufacturing costs at $185. (The biggest expense is the $60 e-Ink display.) In addition, there’s overhead, software development and the lifetime wireless access that comes with each device.
The Kindle DX’s heftier $489 price tag has raised eyes among critics who think a deep recession is an odd time to introduce such an upscale item. But Bezos insists that “preorders are going very well.”
Most company watchers think that Amazon is positioned to make a fortune on the device. Barclays Capital predicts Kindle devices will produce $840 million in profit on $3.7 billion in sales in 2012.


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Your interview excerpts with Bezos were terrific. And very compelling presentation here in this new medium. It strikes me that this sort of publication would not do so well on a Kindle, but it perhaps anticipates the cababilities of the rumoured iSlate from Apple.

Len Edgerly
Dec 29, 2009

You dweebs in ya-yah land, like your sophomoric happy-go-lucky neo-Marxist but sexy President don’t have friends and relatives in the Army do you? Therefore, you do not have a horse in the hunt as to whether or not the insane Jihadists will just get uglier and nastier. And your assessment of history probably goes back to about kindergarten, so you think you no stuff but you are less intelligent and more naive than Obama about the history of propaganda, rumor and atrocity fueled exclamation of wickedness in wartime. While we are busy mirandizing these jokers, they are trying to figure out how to cut our heads off. You think the Jihadists will get nicer because we roll on our backs and piss in the air? I got new for you naive little children… Every GI knows it is better to fight to the death in the event of impending capture than give into capture because death will be more merciful than the rape, torture, general scrotum peeling breast lopping to be administered by the Jihadists before they gouge your head off with a dull spoon… I have one thing to say to bozos like you … Kindle my ass and Blow me!

Al Kelly
Jun 17, 2009

Hi Alan, Interesting update on the Kindle. Even though I am a avid reader… the price needs to come down to make this attractive for my needs, but the educational applications make me hopeful that we could save trees & money Where / how does ‘Kindle technology’ fit in with your development plans for FLYP?

William Longfellow
May 28, 2009