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Are These People Really Worth $200 Million?

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Wolff: What I'm hearing is that there is some inevitability about Amazon achieving Barnes & Noble's margins. That's inevitable?

Kurnit: They might sell 50 times more books! Yes, they have to be profitable on every book they sell, but they don't have to achieve the specific margins. It's a completely different business, and it's a completely different marketplace.

Suh: Maybe they can do better.

Wolff: So on a measurable basis, Amazon becomes a better business than Barnes & Noble?

Suh: Yeah, obviously . . .

Wolff: Yeah, obviously?

Suh: Yes.

Paternot: It's a better business.

Suh: So if the question is, Is Amazon a viable business? Yes.

Wolff: Actually, the question was, If, as you began to say, that Amazon was not in the Internet business but was in the book business, at what point does it get judged on the same criteria that other businesses in bookselling get judged on?

Kurnit: You can't possibly judge a business that operates at a completely different paradigm against the metrics of one in another one. How many books can you sell from a store on the corner of Third Avenue and 57th Street versus how many books can you sell on the corner of the Internet? One is limited, and one is unlimited. You can't compare a bricks-and-mortar operation with one that has a worldwide market with incredibly low distribution or zero distribution costs.

Wolff: Well, you can literally compare. And that's my question: At what point do you sort of sit down and say, "This is a better business than this one"?

Suh: You can compare, but you cannot make judgment calls using empirical criteria until the models both move a little bit.

Wolff: Huh?

Krizelman: At some point, you get into the realization that Amazon isn't in the business of just selling books anymore. That's just a fraction of their business. They've been able already to demonstrate that if you're comfortable with their brand name for books, by the way, we're going to start offering you music and movies, and each quarter, or every six months, we're going to roll out a different product line, a different vertical market, where we're going to dominate, because of the same thing Scott is saying. They can go and tap into a worldwide market.

Kurnit: Wal-Mart doesn't have a very good book section. And if Amazon means to become Wal-Mart . . .

Nisenholtz: It does if you have an eighth-grade education.

Kurnit: Spoken like a true New York Timesman.

Wolff: Actually, Wal-Mart is the fastest-growing outlet in the book business.

Judson: They also sell more toys than anybody.

Suh: And bully for them! That's great.

Judson: You tend to end up with two dominant players in most industries, and that's --

Kurnit: That's cool.

Judson: I mean, Burger King and McDonald's . . .

Kurnit: Just as fast as we can consolidate down to two players is as fast as another player can come in. Think of Fox Television. Everyone said, "You can't start another network." And Murdoch, because he had vision, said, "I'm starting another one." And he did it, and he did great. We will see another bookstore come up on the Internet 50 years from now and surpass Amazon. Fifty Internet years, of course. But there's also another point: We'll see people go into the book business if the book business succeeds, which we still haven't seen.


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