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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

February 9, 2009 at 11:31 PM

Amazon’s Jeff Bezos on Kindle 2.0, its cost, touch, business and more

NEW YORK – Here’s a fuller, edited version of today’s interview with Jeff Bezos during the Kindle 2.0 lauch event.

We talked in an ornate old parlor at the Morgan Library, built by industrialist J.P. Morgan and an appropriate setting for this century’s e-commerce mogul.

Q: What’s it going to take for this to really take off – lower price?

A: It is taking off. [laughs]. No, I mean it very sincerely. We have twice been sold out during the holiday season, which is a darn good plan, and it was not our plan. In both cases, we had made way more devices than we thought we would need a need we still sold out.

Q: Maybe I should rephrase that. When will it become a mainstream device?

A: Well, if you’re a reader, it’s a purpose-built reading device. So is it for everybody? Maybe not. Will it ever be for everybody? Maybe not.

But if you like to read – newspapers, books, magazines – this is a great device to have. If you’re that person, I would say it is mainstream already for the right audience.

Q: I didn’t want to bring up the iPod comparison, but I noticed the brushed metal back and curved edges. Do you guys have a little iPod envy?

A: Are you talking about the industrial design? Our view on this is – have you held it yet? It’s beautiful. I can take no credit for it since I had nothing to do with it [laughs] but I can be a proud father [laughs again]. But the engineering team did a remarkable job on this device.

As you can see it’s very, very thin – for a 3G wireless device. This is a difficult technical achievement. Our customers are the beneficiaries.

Q: Did you think about using touchscreen at all?

A: Touchscreen technology, it’s not yet there for electronic ink. You can do it, but it significantly degrades the contrast and the visibility of the screen. The current touchscreen technologies are a layer that go on top. It’s a thin, transparent layer that goes on top. Of course, it’s not completely transparent. And with the reflective display like this, the light bounces through that transparent layer twice – once to get in and once to get out, back into your eye, and so you get significantly light degradation. Plus, it puts a reflective layer on top.

One of the reasons this screen is so pleasurable to look at, and doesn’t create eye strain, is becauase the ink is almost right on the surface of the screen. It doesn’t have any depth to it.

So there are touchscreen technologies that are starting to become available that go under the display and that might be something that someday could work. But right now it’s still in the laboratory, it’s still a bit of a science project. But someday, a number of years from now, you could imagine that.

Right now, you don’t want a touchscreen on your reading device [if] the primary purpose of the device is reading.

Q: E-Ink plans to have some color displays out by the end of the year.

A: I’ve seen those in the laboratory and probably for volume production, they’re still years away. But it’s exciting technology.

Q: Will color be in Kindle 3.0 then?

A: I think it’s actually multiple years away.

Q: Will you take the software you have on a Kindle and put it onto something like a netbook?

A: That’s what Whispersync is about. We want to make Kindle a bookstore – the largest e-bookstore in the world, with 230,000 titles and growing. We want to make those titles also available on a bunch of different devices and then synchronize them with Kindle.

If you’re in line at the grocery store and you want to read a few pages on your phone, you can go right where you left off, and then when you get back home, maybe you pick up your Kindle and keep reading there.

The best analogy I can give you would be a digital camera on your cellphone. I love having a digital camera on my cellphone because I always have my cellphone with me. but occasionally I want a real camera. If I’m going to take pictures of my kids or whatever, I want a real camera. If I want to read for two hours, I want my Kindle. If I’m going to read for a few minutes, then a bunch of options open up.

Q: It seems like there’s a big opportunity for you if you don’t require people to buy a Kindle to use the software and services.

A: The two things are separate. The Kindle e-book library will be available if you do want a device that’s purpose-built for reading. You want to be able to synchronize it, that’s what Whispersync is about. It’s not a requirement.

Q: With the volume so big on netbooks and the devices having long battery life, I wonder if you’ll develop some sort of Kindle reading application for them?

A: The way you should think about it is we’re excited about making that library available on just about every device.

Q: So there will be a whole range of things that can use the Kindle software, and I’m guessing the Kindle will be the premium experience?

A: I think what you’re going to find is that anybody who reads is going to want a Kindle because it’s so much better for reading, but it’s not either/or: Either people are going to read on their cellphones, or they’re going to read on Kindle, and I don’t think that’s right. Just like I don’t have to decide, am I going to have a real camera or am I going to have a cellphone camera?

The fact is I want both. In fact I have three cameras – I have a cellphone camera, I have a compact camera that’s lightweight, if I go for a hike or something, And then I have an SLR camera that I mostly keep at home to take pictures of the kids because I want the highest quality I can get.

Q: Will you get to the point where you can read Kindle editions on other e-Books? People might be getting confused by the different devices and formats that are emerging. This might slow mainstream adoption of e-books. Will there be interoperability between them all?

A: We certainly haven’t seen that.

Q: How can you overcome that confusion?

A: I wouldn’t want to speculate on that.

Q: The device is nice but to me what’s really interesting are the business innovations.

A: 3G wireless, bundling (wireless service fees) into the cost, making the books cost less.

I agree with you. A lot of this is about business innovation and a lot of it is about technology innovation. It’s really bringing those two things together. You know when we started – now more than four years ago – only at that time could we see that the technologies were shortly going to be in place to make this possible: the combination of the electronic paper technology and fast 3G wireless being distributed, being in enough cities so it’s basically everywhere today.

It’s the combination of those technologies and the busienss model innovation that’s making this.

I should add a third thing – which is the 230,000 titles. The best electronic reading device is useless without the books you want to read.

Q: What are you doing now to get more adoption with publishers?

A: It’s been accelerating over the past 14 months. The past three months we added more than 40,000 titles to the selection so not only are we going to keep growing [it], we’re going to keep accelerating the rate at which we’re growing the selection. The vision is every book, ever printed, in any language, all available within 60 seconds. That’s a big, long, multi=year vision to get every book ever printed, but it is possible and we will eventually do it. We’ll just have to be relentless [laughs].

Q: What are you doing to make publishers speed up?

A: Publishers are excited about this – like us, they watched e=book sales go nowhere for 10 years. We kept trying to sell e-books and nobody bought them. You needed an electron microscope to find the sales.

Fourteen months ago, with the launch of Kindle 1, that changed. So I think publishers are as excited as we are about the future of e-books.

Q: Is there pressure on Amazon from publishers to price the Kindle at, say, $199 to increase the platform’s reach?

A: We can’t offer this for $199. If you look at the cost of this device – it has a sophisticated EVDO radio, it has the latest electronic display – if we could make this device cheaper we would. But we can’t. There’s a lot of technology pushed into this little tiny package. It is what it is.

When you buy a 3G phone, by the way, you’re signing up for a two-year contract with a $60-a-month bill. They’re subsidizing the cost of the hardware with the $60 a month or whatever it is you’re paying.

[The Kindle] is sold with no annual contract and no monthly bill. You buy this device and whatever you buy -a newspaper subscription, you pay for that. You buy a book, you pay for that.

We’re not asking people to sign up for a two-year contract.

Q: Will we see Kindle hardware subsidized through subscription deals, like, say, a book of the month club or a newspaper subscription?

A: Anything’s possible. I think there is reason for optimism about newspapers on Kindle because if you look at the printing cost of newspapers, these are dramatically large expenses. There is an argument to be made that over time – and it will take some time – that printing infrastructure doesn’t make as much sense as everybody having a device like this.

Q: How about the developer story – are you going to open this up more to outside software developers to write applications and load things on there?

A: I don’t want to speculate on the future on that. You’ll just have to stay tuned.

Q: So we might hear more about that?

A: It’s possible. I don’t want to foreshadow anything so you’ll just have to stay tuned.

Q: Would the same go for the Kindle’s browser?

A: The browser is very basic. It doesn’t do Flash, for example. It’s nice to have but it’s not the primary reason, it’s not the purpose of the device. The device is for reading. It does have a Web browser – people like the Web browser – but it’s very basic functionality.

Q: How about a little more transparency with the sale numbers – are we going to start hearing how many units have been sold?

A: We’re going to continue with our practice of not sharing those numbers.

Q: Wouldn’t more disclosure help you sell the Kindle platform to publishers?

A: Publishers get to, at this piont, they get to see – we’re sending them checks. The most important thing if you’re a publisher is, are the books selling? You don’t really care if the device is selling, and the books are selling.

Kindle books already are selling. If you take the 230,000 titles where we have Kindle editions – Kindle unit sales are already more than 10 percent of all our sales. For that to happen in 14 months is very surprising. It took us 14 years to build up our physical book business. Now when a title becomes available in Kindle format, it’s immediately worth 10 percent of our unit sales on Kindle. That’s pretty surprising.

Q: When we think about Amazon’s phases of growth – first the bookstore, then the platformization of the store, then the multi-platform business with new services – where should we put the Kindle? Should we think of hardware as a new stack here, or is it an extension of the store?

A: It’s a new skill. We’ve been working on it for four years. When you look at the engineering that is incorporated in this incredibly thin package, the team has acquired that ability.

Q: But it’s more an extension of the Amazon store as opposed to an entirely new business, right?

A: The device is one thing; that’s the new skill we had to learn. But the device is only a part of Kindle the service. So Kindle the service includes the largest e-bookstore in the world. Kindle as a service includes all the servers used to wirelessly deliver this content. We had all the skills that we needed to do those things. We had a lot of the pieces in place based on our 14 years of history but the one thing we needed to add to our skillset was the engineering for the hardware device itself. I’m just incredibly proud of that team.

Q: Did you have to build something like this to maintain Amazon’s position as a bookseller?

A: To get this whole ecosystem to work, we had to build an integrated, seamless reading experience. Keep in mind we had tried the unintegrated, unseamless approach because we’ve been electronic books for years and it didn’t work, nobody cared. So it’s the seamlessness, of putting the whole thing together and making it really easy and clean for people, that’s making it work.

Q: Did you think you had to have the hardware or somebody else would – and take from your book business?

A: We love being pioneers. We are always focused on looking down new alleys. Most of the alleys we look down turn out to be blind alleys, but every once in a while we go down one that turns into a big broad avenue. You can pursue the competitor strategy of close following – you don’t have to spend all this money on those blind alleys. When you see somebody do something successful, you jump on it and copy it as quickly as possible. There’s nothing wrong – that’s a valid business strategy. It happens to not be ours.

We’ve been very customer focused for our history and we like inventing new things. The kind of people we’ve attracted over the years like to invent new things so for us this all about the future and all about optimism.

Q: It seems like your company’s on a roll, especially after this last quarter.

A: Well, thank you.

Q: Is Amazon going to be the “it” company of 2009?

A: I’ve been asked by several people, what did you do special in Q4? The fact of the matter is we did nothing special in Q4. We did the same things that we’ve been doing for 14 years, which is working on lowering prices, increasing selection, speeding delivery. The accumulation of those things perhaps you saw in Q4.

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