Amazon.com Won't Profit From 'Harry Potter'

Friday, 15 Jun 2007 | 4:53 AM ET

Amazon.com has taken more than a million pre-orders for the final "Harry Potter" book due out in July, but the world's largest Web retailer won't make a profit, Chief Executive Jeff Bezos told shareholders at the company's annual meeting Thursday.

Amazon's handling of the "Harry Potter and the Deathly Hallows" release -- a $17 discount off cover price, a free shipping offer and guaranteed on-time delivery -- showed yet again that the company is willing to take a hit to cement customer loyalty.

Bezos hammered on Amazon's "customer-centric" approach during the meeting. He told the 50 or so shareholders gathered at the Seattle Repertory Theatre that Amazon sacrifices $600 million in shipping revenue each year, thanks to the $79-a-year Amazon Prime free shipping membership available in the U.S. and Japan, and other shipping offers. Bezos also showed off the "Subscribe and Save" program that lets U.S. customers set up recurring deliveries of certain grocery items and save 15%.

The CEO urged shareholders to be patient following several years of heavy investment in technology, new product categories and new locations such as China that depressed earnings and ate into margins.

"We are very focused on the long term, but we also believe that the long term has to eventually come," he said. Bezos noted that in the past, periods of intense investment started to pay off in five to seven years.

One nascent Amazon business Bezos hopes will take off is aimed at software developers. The company sells data storage space and computing power at pay-as-you-go rates, and hopes that programmers will use the Web-based services because Amazon handles the hassle of keeping servers up and running.

Bezos said shareholders should be watching to see if new initiatives like Web services and sales of music and movie downloads pay off.

"We won't be right every time," he warned.

During a humorous, QVC-style moment, Bezos held up several new items from Amazon's online stores, including a Swiss Army knife larger than his hand, a watch that displays time in binary code, a bag with powdered strawberry daiquiri mix -- just add rum and shake -- and low-fat dog treats.

Bezos also showed off items from Endless.com, a high-end shoe and accessory site owned by Amazon. "These are platform sandals," he said, holding up a pair of summery cork wedges. "When I wear them, they make my calves look really good."

Official business, including the re-election of the entire board of directors, took up about five minutes at the start of the meeting.

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