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Outbooking the Book: Jeff Bezos, Chairman, President and CEO,

Jeff Bezos

Jeff Bezos is among the Internet’s true pioneers and visionaries, creating one of the Web’s greatest brands and one of its most enduring companies. He founded Amazon (AMZN) in 1994, using his theories about leveraging the Web to move goods around more efficiently. While the company has had some bumps along the way and has morphed its businesses relentlessly, it has defied its critics and has become the most significant online retailer in the world.

But Amazon is not without its challenges, in the market for digital media downloads, where Apple (AAPL) is market leader. And now in the Web services market as well, where Google (GOOG) and IBM (IBM) are both developing competing cloud-computing infrastructures.

  • Walt Mossberg and Kara Swisher welcome Jeff Bezos to the stage.
  • Walt, interviewing Bezos solo, begins by asking the audience how many attendees have piles of Amazon boxes laying around the house. Clearly, that’s the case in a number of attendee houses.
  • Given Amazon’s leading position in the online retail space, Walt asks, why is it pursuing initiatives like e-books and Web services. Bezos notes that Amazon bases its strategy on customer needs, not the company’s skill set. “If you only focus on your own skill set, you will ultimately be outmoded by competitors. You must consistently review and enhance your skill set according to customer needs.” Bezos cites e-books and Kindle as an example of this. Notes that Amazon had never done hardware, but after recognizing consumers’ need for a good e-book solution decided to address it with Kindle.

    Jeff Bezos at D6

  • Walt wonders how an online retailer adapts to hardware production. Bezos explains that the retailer had to reassess its ideas about distribution, wrangle publishers into adopting an attractive pricing model, and reinvent the wireless business model.
  • Walt asks how many Kindles Amazon has sold. Bezos declines to answer, but “in the spirit of offering news,” (riffing on Walt and Kara’s earlier comment that the theme of D6 was news) provides another metric: On a title-by-title basis, he says, Kindle unit sales now account for more than 6% of Amazon book sales for the 120,000 titles that are available on Kindle.
  • Walt asks if the recent Kindle price cut is a preface to the introduction of the next Kindle. Bezos says it’s not: The next iteration of the device is a ways off.
  • Discussing the transition from analog to digital books, Bezos says there are great things about analog books, but lousy things as well, and that the speed of the transition depends on the industry’s ability to duplicate the great things and remove the lousy ones. “You’ve got to outbook the book,” he notes adding that e-books can’t get hot, they must be light. And they absolutely cannot beep. Beeping devices, says Bezos, are annoying. “I call them self-important devices.”
  • Walt notes that the Kindle’s killer feature is seamless delivery of content. Bezos says Amazon’s goal was to offer wireless book downloads in 60 seconds or less and to make that experience invisible to the user.
  • Walt asks: How worried are you about loss of the intangible things offered by physical books? Bezos: We’re not that worried. “People loved their horses too,” he says, noting that you don’t keep riding your horse to work just because you love it. He adds that Amazon spent some time investigating those intangibles–smell, for example (a combination of a book’s binding, its glue and mildew). “We’re not trying to displace people’s love of the physical book. But what’s important here is not the container, but the long-form narrative.”
  • Walt asks about feature creep: Will Kindle remain an e-book, or will it become a sort of pocket reading/Web surfing/note-taking device? Bezos replies that Amazon will add non-e-book features to Kindle if they complement the device’s core purpose. Bezos notes that electronic ink is great for reading books, but crappy for surfing the Web. It loads too slowly. It’s not the right technology for a Web browser, he says. Walt asks if Amazon would reconsider this position if an e-book competitor added decent Web browsing to its e-book. Bezos concedes that it might. “In some ways the Web is the most important book in the world.”
  • Walt: Can you imagine a day when Kindle is a significant part of your business? Bezos says he can. When we embark on initiatives like this, we consider very carefully whether it can someday have a significant impact on our business.
  • Bezos: We want to be missionaries about our products.
  • Moving on to Amazon’s media-download business. How serious are you about that business, asks Walt. Very serious, says Bezos. He notes that it’s a very competitive space and that Amazon is innovating in it. The company will launch for-pay streaming in the next few weeks.
  • Will Apple someday lose its dominance in the digital-media download space as rivals develop new distribution models? Bezos: That’s a hard question to answer. Walt asks if Amazon is benefiting from the fact that the music industry isn’t always happy with Steve Jobs. Bezos says it’s in the music labels’ best interests to have many distributors: “If I were a content owner, I would want to make sure that my content was distributable in as many ways as possible. You want to get your content out to as many people as possible.”
  • Walt: So iTunes is going down, then? Bezos: No. That’s not what I said.
  • Moving on to Web services–Amazon S3, EC2, etc. Bezos refers to these as infrastructure Web services. Allows users to focus on software and not worry about data centers.

Jeff Bezos at D6

  • Walt: So someday will I think about Amazon as the place to go for cloud computing, rather than books? Bezos replies: If you’re a software engineer you might. Walt: No chance of that ever happening.
  • Bezos admits that Amazon backed into this business. Amazon really is just one big application, he says. Amazon really is just one big application, he says, noting that the company’s Web-services business arose out of the company’s own need for such things. We realized that we could externalize this and turn it into a business.
  • Walt asks if Bezos is worried about the economic slowdown. Amazon’s doing well, says Bezos, who notes that current economic conditions are in some way favorable to Amazon. No need to buy gas to drive to the store, etc. “We don’t know where we might have been if the economy was stronger,” Bezos says, “but we haven’t taken a real hit.”
  • Moving on to Q&A: First question concerns Kindle’s DRM. Bezos says Kindle’s default setting is DRM-free. It’s DRM agnostic, says Bezos, noting that publishers determine how the device will manage their copyrights. “My own view is that DRM-free does not slow down sales.”
  • Question about Amazon’s recommendation engine. Bezos says he thinks the company does pretty well on that front. “We do make some dumb recommendations, but we find a lot of serendipity.”

For more coverage, see Barron’s Tech Trader Daily.

A note about our coverage: This live blog is not an official transcript of the conversation that occurred onstage. Rather, it is a compilation of quotes, paraphrased statements and ad-lib observations expeditiously written and posted to the Web as quickly as we were able. It was not intended as a transcript and should not be interpreted as one.

Video highlights of the interview can be viewed here and here.

Jeff Bezos Session Photos

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