Bezos, a 47-year-old former Wall Street money manager, started Amazon on the theory that a web-based bookstore would resonate with consumers, because it seemed like the easiest way to browse millions of titles at once.
He was right. The company grew rapidly and Amazon began trading publicly in May 1997, despite never having turned a profit. It took five more years—and the addition of product categories like CDs, DVDs, and consumer electronics—before the online retailer reported any net income. These days, Amazon consistently reports strong growth: In the most recent quarter, it earned $191 million on $9.91 billion in revenue.
It was Apple that moved into digital content first, however. With the arrival of Apple’s iPod digital music player, which first came out in 2001, Apple figured consumers would be willing to pay for legal, high-quality digital music they could download to the devices. Apple became a major player early on, making deals with major record labels to sell digital tunes through its iTunes Store in 2003. Soon the iPod became more multimedia-savvy: Apple added TV shows in 2005 and movie downloads a year later.
Amazon soon entered the market itself, rolling out its own digital video downloading service in 2006 and music downloading service a year later.
It was in 2007, though, that things really heated up. That’s when Amazon rolled out its first Kindle eReader, upending the book market once again by turning the focus from costly paper books to electronic ones that could be delivered quickly and cheaply to customers on a reading device.
The Kindle rapidly grew the company’s eBook business, and Amazon said in May that it was selling more eBooks than physical copies of books. But the Kindle Fire’s ability to show eBooks, surf the web, stream movies and TV shows, and support apps positions it as an even better catalyst for Amazon’s digital goods sales.
The Kindle Fire, which runs Google Inc.’s Android software, is clearly meant for gobbling up Amazon’s digital media in particular. While most Android tablets include access to Google’s Android Market for downloading games and apps, the Fire will eschew that in favor of Amazon’s own app store. And while the tablet doesn’t have much storage space—8 gigabytes, compared with 16 GB on the cheapest iPad—Amazon is offering users free web-based storage for any digital content they buy from Amazon.
Another weapon in Amazon’s arsenal: In hopes of keeping Kindle Fire users purchasing both digital and physical items, the tablet includes a free month of Amazon’s premium shipping service, Amazon Prime. Prime, which costs $79 per year, gives users unlimited two-day shipping on any items they buy from Amazon, as well as free access to a library of 11,000 streaming movies and TV shows. This is about half of what Netflix Inc.’s streaming library has.
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