Bezos: Amazon is perfectly happy with its low profit margins

Jeff Bezos

Today’s must-read for anyone interested in Amazon.com is Steven Levy’s interview with CEO Jeff Bezos in Wired magazine. It covers the waterfront on Amazon, focusing largely on the new Kindle Fire but also giving Bezos a chance to explain how he thinks about almost every aspect of Amazon’s business.

The piece draws a clear distinction between Amazon and Apple, with Bezos making it clear that the Kindle Fire is meant to be a low-priced, utilitarian portal to the cloud — a component in a “media service” not a piece of high-end industrial design. As Levy notes, that’s some important context for the mixed Kindle Fire reviews out today.

Five of the most interesting quotes from the interview …

On the Kindle Fire’s $199 price tag: “We think it’s a unique approach in the marketplace—premium products at nonpremium prices. We’re a company very accustomed to operating at low margins. We grew up that way. We’ve never had the luxury of high margins, there’s no reason to get used to it now.”

Why should users of e-ink Kindle readers switch to the backlit Kindle Fire? “They should buy both. When you’re reading long-form, there’s no comparison. You want the e-ink. But you can’t watch a movie with that. And you can’t play Android games. And so on.”

Why not just give away the low-end Kindle for free? “It’s an interesting marketing idea, and we should think about it over time. But $79 is low enough that it’s not a big deal for many people.”

On the question of software patents: “For many years, I have thought that software patents should either be eliminated or dramatically shortened. It’s impossible to measure the toll they’ve had on the software industry, but on balance, it has been negative.”

On Eric Schmidt’s four horsemen of the Internet (Google, Apple, Facebook and Amazon): “Lists like that are fine and interesting, but if I were making that list I would have a hard time not having Microsoft on it. They’ve done a lot of innovative things, some of which get overshadowed by their big existing businesses. You look at something like Kinect, it’s pretty cool.

Other topics covered include the Silk browser, Amazon Web Services, Blue Origin, and Bezos’ thoughts on social networking. Read the full interview here.

  • Guest

    “For many years, I have thought that software patents should either be eliminated or dramatically shortened. It’s impossible to measure the toll they’ve had on the software industry, but on balance, it has been negative.”

    LOL. This from the guy who wanted to avoid state taxes as well.

  • Anonymous

    I’d say Amazon’s biggest risk is low margins.  They have some amazing ideas, and AWS is a paradigm shift for the entire industry.  It’s just a matter of time before they have “cloud computing” (PaaS) locked in.  But at those lousy margins, who cares?

    Now I  hope Bezos is playing his cards close to his chest here. I doubt investors will see the quote “why get used to profit margins?” and walk away with a good feeling!  Perhaps when AWS runs the industry we’ll see a sudden interest in profit margins.  ‘ insert evil laugh’