AmazonFresh Webvan

The online grocery start-up Webvan may have been the single most expensive flame-out of the dot-com era, blowing through more than $800 million in venture capital and IPO proceeds in just over three years before shutting its doors in 2001.

Twelve years later, though, Webvan is rising from the dead - in the form of an online grocery business called AmazonFresh.

Four key Amazon.com Inc executives - Doug Herrington, Peter Ham, Mick Mountz and Mark Mastandrea - are former Webvan officials who have spent years analyzing and fixing the problems that led to the start-up's demise.

Kiva Systems, the robotics company that Amazon bought last year for $775 million in one of its largest-ever acquisitions, was built on ideas and technologies originally developed at Webvan and is a key part of the AmazonFresh strategy.

Even Webvan's old Web address, webvan.com, is now part of the Amazon empire.

"We had a lot of Webvan DNA in the room and we drew on that experience a lot," said Tom Furphy, who helped start AmazonFresh with Herrington and Ham before leaving to become a venture capitalist. "That was a good formula for building the business responsibly."

Amazon declined to comment for this story, or make any AmazonFresh executives available for interviews.

Former Amazon and Webvan officials say Amazon drew three big lessons from the Webvan debacle: expand slowly, limit delivery to areas with a high concentration of potential customers, and focus relentlessly on warehouse efficiency.

The opportunity for Amazon is huge. The grocery business in the United States generated $568 billion in retail sales last year, with online accounting for less than 1 percent, and it's among the last major retail sectors that the online giant has yet to tackle.

But the risks are large as well. Groceries are a notoriously low-margin business, and the aggressive expansion of discounters like Walmart has made the business even more cutthroat than it was in Webvan's day.

And competition in the online grocery business is heating up. FreshDirect and Peapod have been plugging away for years, while traditional grocery chains like Safeway also do online ordering and delivery. Walmart is testing its own fast delivery service in some markets in the United States now.

SLOW EXPANSION

AmazonFresh now serves Seattle and Los Angeles, and it plans to launch in the San Francisco Bay Area later this year. If these cities go well, Amazon is eyeing 20 new markets for 2014.

But the big plans belie what has been one of Amazon's most cautious entries into a new business since founder and Chief Executive Jeff Bezos started selling books online in the 1990s.

The grocery service started in just two Seattle neighborhoods, Medina and Mercer Island, in 2007, and then slowly spread to other Seattle communities over the next five years. It didn't expand beyond Seattle until June 10 of this year, when it launched in Los Angeles.

The Los Angeles roll-out is similarly modest, covering only a few zip codes initially. "We know customers value this service but the economics remain challenging," an Amazon spokeswoman said when describing the L.A. launch.

Webvan - which ironically was also the brainchild of a book-seller, Louis Borders - expanded to nine major metro areas just 18 months after it began serving the San Francisco Bay Area, former executives recall. (Borders, co-founder of the now-defunct Borders Books & Music, declined to comment for this story.)

Webvan began its big expansion in Atlanta while the San Francisco service was still "wobbly," recalls Krishna Hegde, Webvan's vice president of deployment and systems engineering.

After the Atlanta launch in April 2000, Hegde said he recommended that the company slow down. But Mark Zaleski, president of operations, argued the company should press on because of promises made to Wall Street investors, Hegde said. Zaleski could be not be reached for comment.

Webvan "committed the cardinal sin of retail, which is to expand into a new territory - in our case several territories - before we had demonstrated success in the first market," said Mike Moritz, a Webvan board member and partner at Sequoia Capital, one of the company's venture capital backers. "In fact, we were busy demonstrating failure in the Bay Area market while we expanded into other regions."

DELIVERY DENSITY

Webvan not only launched in many cities, it also offered service across entire metro areas. That resulted in the company's delivery trucks making many trips where they only dropped off a few orders.

"The biggest failure of Webvan was delivery density," said Gary Dahl, vice president of distribution at Webvan from 1997 to 2001. In the Bay Area, he said, Webvan made money delivering in San Francisco and Oakland, but lost a lot of money delivering in suburbs such as Orinda and Moraga.

"Mean travel time between delivery stops is the key to success in the home delivery business," Dahl explained. "Travel one block in San Francisco and you have passed 200 people, travel one block in Moraga and you have passed about six people."

AmazonFresh has tackled this problem by only delivering to densely populated areas of Seattle, and it's taking the same approach in LA, according to Keith Anderson, an executive at consulting firm RetailNet Group.

"If you drive into certain neighborhoods in Seattle you will see a lot of front doors with AmazonFresh totes," he said. "That's because Amazon expanded gradually into specific neighborhoods and tried to deliver to lots of homes in those specific areas."

FreshDirect covers more than 80 percent of the New York metro area, but it took the company about a decade to expand its delivery network this wide. Last year, FreshDirect launched in Philadelphia.

KIVA ROBOTS PROVE KEY

Webvan also suffered severely from weaknesses in the design and technology of its giant warehouses. At its first facility, there was a single conveyor belt that snaked about five miles through the building bringing items to workers, who would then pick and pack the products into totes, Webvan Chief Technology Officer Peter Relan said.

When the conveyor belt broke, the operation would grind to a halt, he recalled.

Mick Mountz, an MIT-trained Webvan executive, oversaw the picking and packing process, along with Mark Mastandrea, and together they tried out lots of technology to make the warehouse run more efficiently, according to Relan.

For each $100 bag of groceries, it cost Webvan about $30 to pick and pack; the company had to get that down to $10 to make the process economically viable.

Mountz came up with a solution based on multiple robots that would bring products from different parts of the warehouse to human workers for picking and packing. Unlike a conveyor belt, if a robot broke down it could be fixed while the other robots continued their work.

However, Webvan had spent so much on its original warehouse - about $100 million, according to Relan - that the company was loath to completely change the process in favor of robots.

After Webvan went bust in 2001, Mountz founded Kiva Systems, which designed and built robots that now zip around the warehouses of retailers including Staples Inc, Walgreen Co and Gap Inc.

Amazon bought Kiva in 2012 for $775 million. Mountz is still running Kiva, while Mastandrea became director of delivery experience at AmazonFresh in March.

"When there are a large number of products and the shapes and sizes vary, as they do in grocery, you still need a human at the end to do the picking and packing," said Ajay Agarwal of Bain Capital Ventures, which was an early investor in Kiva. "The Kiva System is the best solution out there for that combination of warehouse technology and human workers."

Amazon has one other thing Webvan never had: a huge, existing customer base. While Webvan had planned to expand into delivery of other goods once it had developed a base of grocery customers, Amazon is going the other way, and can help defray the cost of delivering groceries by delivering books or electronics at the same time.

There are other advantages that have accrued over time. The spread of cloud computing services - pioneered by Amazon's Web Services business -makes it cheaper to run online businesses, while consumers are more comfortable buying online through faster Internet connections.

Online shoppers who type "webvan.com" into an Internet browser today will find a website selling more than 45,000 non-perishable grocery items. In the top right-hand corner, it says Webvan is "part of the amazon.com family" and consumers can use their existing Amazon accounts to buy.

"Amazon purchased the name a couple of years ago," Dahl said. "Maybe they will revive it if sales are slow in the Bay Area."

Amazon.com Inc is planning a major roll-out of an online grocery business that it has been quietly developing for years

Amazon.com Inc is planning a major roll-out of an online grocery business that it has been quietly developing for years, targeting one of the largest retail sectors yet to be upended by e-commerce, according to two people familiar with the situation.

While food is a low-margin business, Amazon could outperform similar online grocery services by delivering orders for higher-margin items like electronics at the same time.

One of the people familiar with AmazonFresh's expansion plans said new warehouses will have refrigerated areas for food, but also space nearby to store up to one million general merchandise products, in some cases.

The company has been testing AmazonFresh in its hometown of Seattle for at least five years, delivering fresh produce such as eggs, strawberries and meat with its own fleet of trucks.

Amazon is now planning to expand its grocery business outside Seattle for the first time, starting with Los Angeles as early as this week and the San Francisco Bay Area later this year, according to the two people who were not authorized to speak publicly.

If those new locations go well, the company may launch AmazonFresh in 20 other urban areas in 2014, including some outside the United States, said one of the people.

Bill Bishop, a prominent supermarket analyst and consultant, said the company was targeting as many as 40 markets, without divulging how he knew of Amazon's plans.

An Amazon spokeswoman did not respond to a request for comment on Tuesday.

Amazon is searching for new, large markets to enter as the company tries to maintain a growth rate that has fueled a 220 percent surge in its shares over the past five years. The grocery business in the United States, which generated $568 billion in retail sales last year, may be a ripe target.

Amazon's expansion plans are a potential threat to grocery chains such as Kroger Co, Safeway Inc and Whole Foods Market, as well as general-merchandise retailers Wal-Mart Stores Inc and Target Corp, which also sell a lot of groceries.

"Amazon has been testing this for years and now it's time for them to harvest what they've learned by expanding outside Seattle," said Bishop, chief architect at Brick Meets Click, a consulting firm focused on retail technology.

"The fear is that grocery is a loss leader and Amazon will make a profit on sales of other products ordered online at the same time," he said. "That's an awesomely scary prospect for the grocery business."

Kroger, Whole Foods, Supervalu and Safeway did not respond to requests for comment on Tuesday. Target declined to comment.

A successful foray into groceries could also help underwrite the development of a broad-based delivery service employing Amazon trucks to deliver directly to homes, which could have implications for UPS, FedEx and other package delivery companies that currently ship Amazon goods.

Still, groceries have proven to be one of the most difficult sectors for online retailers to crack. One of the most richly funded start-ups of the dot-com era, Webvan, was a spectacular failure as the cost of developing the warehouse and delivery infrastructure proved overwhelming.

Roger Davidson, a former grocery executive at Wal-Mart and Supervalu, said Amazon will struggle to make money from AmazonFresh because fresh produce can easily go out of date in storage warehouses and get damaged during delivery - something known as "shrink" in the business.

"Will it work? I would bet against it," Davidson said. "The reasons these businesses have failed in the past have not gone away."

COMPETITION

Still, Amazon is not alone in wanting to expand in the online grocery business.

Wal-Mart is testing same-day and next-day delivery of online grocery and general merchandise orders in the San Francisco Bay Area and operates a grocery delivery business in Britain.

"We are ready and able to expand grocery delivery in the U.S. as the market demands," Wal-Mart spokesman Dan Toporek said.

FreshDirect delivers food to homes and offices in some parts of New York City and its trying to expand its service into the Bronx.

Peapod, owned by international food giant Royal Ahold NV, says on its website that it is the largest Internet grocer in the United States, delivering more than 23 million orders across 24 markets.

Davidson, who worked with Peapod for several years during stint at Ahold USA, said Peapod struggled to make money for most of its existence. But he believes it now turns a small profit due to supply chain efficiencies, population density in Chicago and its connection to brick and mortar stores on the east coast.

Davidson favors a strategy he called "Click and Connect" which is being used by Harris Teeter, a food and pharmacy chain on the East Coast of the United States. Customers order food online and choose a time to pick up the produce from designated areas outside the company's stores. There is a $4.95 service fee for this.

"Traditional grocery retailers will likely fight back against Amazon with Click and Connect," he added.

It is not clear whether AmazonFresh in Seattle is profitable because Amazon does not disclose results from the business.

Amazon Chief Executive Jeff Bezos was asked about the business during the company's annual shareholder meeting last month and he said that the team had "made progress on the economics over the last year."

"They've been doing a lot of experiments and trying to get the right mixture of customer experience and economics," he added.

COMBINED ORDERS

If online orders also include higher-margin general merchandise such as digital cameras, then AmazonFresh has a chance at profitability, said Manfred Bluemel of Zeitgeist Research, who was head of market research worldwide at Amazon until late 2010.

"Grocery is a frequency business. If Amazon can deliver to consumers' homes two or three times a week, they can up-sell other items," he said.

Bluemel said AmazonFresh's expansion will likely focus on areas where Amazon already offers same-day delivery, or will do so soon.

Amazon offers same-day delivery in several cities including New York, Washington D.C. and Chicago, and since last year the company has been building new distribution warehouses on the outskirts of the Los Angeles and San Francisco Bay areas.

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Video streaming services from Amazon

SAN FRANCISCO (Reuters) - Amazon.com Inc is testing a new monthly option for its popular Prime video-streaming service as the world's largest Internet retailer steps up competition with Netflix Inc.

Prime typically costs $79 a year in the United States for free two-day shipping, free video streaming and access to Amazon's Kindle e-book lending library. The company is now offering the service for $7.99 a month on its website, which works out to $95.88 a year, but at that rate it can be purchased strictly on a month-to-month basis.

The monthly option is more comparable to Netflix's streaming video subscription, which also costs $7.99 a month but does not come with free shipping and an e-book library. Another streaming rival, Hulu, also charges $7.99 a month.

An Amazon spokesman said the monthly Prime option was a test and declined to comment further.

Netflix and Hulu offer greater video selection than Amazon, though Amazon is spending hundreds of millions of dollars buying more content from Hollywood and TV studios.

"As Amazon continues to add movie and TV content to Prime, we see it likely adding more competitive pressure to the legacy online video services," Colin Sebastian, an analyst at R.W. Baird, wrote in a note to investors on Tuesday.

Netflix shares fell 2.5 percent to $76.27 in afternoon trading on Tuesday. Amazon shares climbed 1.1 percent to $237.01.

Amazon's new monthly Prime option coincides with the holiday shopping season, giving shoppers a way to use the two-day shipping service for gifts without the annual obligation, Sebastian noted.

"While one risk for Amazon is that consumers use Prime for just one month to take advantage of free shipping on large purchases, the test could also reveal that a ready market for alternative pricing and serve as a new customer acquisition tool," the analyst wrote.

Kindle for school

Amazon.com Inc announced an initiative on Wednesday to get its Kindle e-readers and tablet computers into schools, entering a market that has been particularly successful for rival Apple Inc and its iPad device.

Amazon said it has been testing Kindles in recent years with hundreds of kindergarten through 12th grade schools in the United States, selling the devices at bulk discounts and helping them purchase and distribute e-books to students.

On Wednesday, the company unveiled Whispercast, a service that lets schools manage fleets of Kindle devices from one online location.

Administrators and teachers can set up user accounts for each student and arrange them into one or more groups, such as a specific class or grade level. They can also set limits on what students can do with the devices, such as blocking Facebook and web browsing and disabling purchasing, Amazon said.

Amazon's education push is part of a broader effort by the world's largest Internet retailer to get Kindles into as many hands as possible. The company sells Kindles at cost and hopes to make money selling e-books and other content such as apps, games, music and video through the devices.

"We want to make it as easy as possible for everyone to own a Kindle device. Any time we can make that easier, we do that," said Jay Marine, vice president of Kindle product management. "And we have a particular mission to increase reading, especially among kids."

Education is a potentially huge market for tablets and e-readers, partly because they are easier for administrators to manage than personal computers and laptops, according to Carl Howe of consulting firm Yankee Group.

Apple's iPad has been a big hit with educational institutions in the United States. In the second quarter of 2012, the company said sales of iPads in the U.S. education market almost doubled year-over-year to just under 1 million units.

Amazon's Marine said Kindles are easier to carry for students than lots of physical books. Students who are learning to read may also be less intimidated by big books, because the content is housed in small, thin devices, he added.

Amazon has been offering discounts on the hardware for bulk purchases by schools. The company does not currently offer bulk discounts on e-books, but Marine said that may come in the future.

Whispercast will also work in coming months with apps that run on Amazon's Kindle Fire tablets, he added.

Clearwater High School in Florida and St Rose of Lima School in Texas are among schools that have been testing Kindles with students.

Clearwater High has been using about 2,000 Kindles for more than two years and recently the test was expanded to more than 122 schools in the same district, according to Principal Keith Mastroides.

The devices make students more enthusiastic about reading and studying in general, he said.

Still, Yankee Group's Howe said there are limitations on how useful e-books can be in education. Physical books can be re-sold easily, unlike digital versions, he noted.

It is also more difficult for a student to study from multiple e-books at the same time, Howe explained.

"Imagine a student in a library with 10 books with book marks in each one," he said. "Try doing that with an e-reader. It's pretty hard and kind of a mess."

Whispercast is also designed to make it easier for businesses and non-profit organizations to use Kindle devices.

Companies can use the service to centrally distribute documents and other items such as conference agendas or training materials to employees or customers, Amazon said.

(Reporting By Alistair Barr; Additional reporting by Poornima Gupta; Editing by Tim Dobbyn, Bernard Orr)

Movies from Amazon.com

SAN FRANCISCO (Reuters) - Amazon.com Inc is producing its own movies and TV programming using the consumer tracking and data crunching skills it developed while becoming the world's largest Internet retailer.

Essentially, Amazon is crowdsourcing the creation of original content -- movies such as "Zombies versus Gladiators" and the children's TV series "Magic Monkey Billionaire."

The retailer hopes the approach will result in more hits and fewer flops than the traditional Hollywood practice of filtering creative ideas through three-martini lunches with studio bosses and movie stars.

Like rival movie provider Netflix Inc, Amazon is developing its own content to supplement movies and TV shows from Hollywood's back catalog. Amazon pays an estimated $1 billion a year to stream programming from others over its Prime Instant Video service.

Since late 2010, the company's Hollywood studio, Amazon Studios, has let aspiring screenwriters and film makers upload thousands of scripts to its website.

It has an exclusive, 45-day option to buy movie scripts for $200,000 and TV series for $55,000. It can also pay $10,000 to extend options for 18 months.

Instead of green-lighting a feature-length film or TV pilot, Amazon first helps develop the scripts it options into trial videos. It posts these online to solicit reviews and feedback from its millions of customers. Writers use the feedback to adjust scripts, hoping to boost the chances of creating a hit when Amazon spends millions of dollars turning projects into full movies or TV shows.

"Hopefully we can avoid big bombs," said Roy Price, head of Amazon Studios. "Our notion for what the world needs may be a roller-skating movie or a battleship film, but that could be wrong. We can do tests and find out that, actually, no one cares about this project or that one. If you do that before you spend $200 million on it, that would be good. Good for customers and good for the business."

For instance, Amazon took its nine best test movies from 2011 and posted them on Amazon Instant Video, the company's streaming video service. Customers viewed the projects hundreds of thousands of times, according to the company. It is using reviews and feedback to re-write scripts.

Amazon also collected data on how long customers watched the test videos and how many watched all the way through.

"That form of implicit feedback is as useful, or more useful sometimes, than the explicit feedback," Price said. "This told us something about the marketability of these ideas."

Amazon Studios recently turned "Blackburn Burrow," a movie script by screenwriter Jay Levy, into a digital comic to get more consumer input.

The comic, recently the most-downloaded free comic on Amazon's Kindle store, comes with a survey for feedback on what people thought about the story, according to Levy.

"If you look at the amount of data Amazon collects every day, it's incredible," Levy said. "This way, they begin to get actual feedback about the story and will create something that people really get invested in."

Bringing market research to the creative process is nothing new, of course. Hollywood tests movies with focus groups all the time. But it is not done on such an open, large scale as Amazon's approach.

"You often don't get audience feedback until you almost release a movie," said Edward Saxon, Oscar-winning producer of "The Silence of the Lambs."

"Film-making is an iterative process - a draft and then another draft. Amazon is very smart to find more places along the way to get feedback."

Saxon is one of a handful of big-name producers who have signed on to Amazon Studio projects. He is helping develop "Children Of Others," about a woman who takes her last chance at a fertility clinic, only to find that her unborn child may be the first wave of an alien invasion.

Amazon Studios currently has 21 movie projects and nine TV projects in development.

The movies will be made for theatrical release - Amazon has a deal that gives Warner Bros. Pictures the first crack at bringing them to the big screen, known in industry parlance as a "first-look" deal. Any TV series will be distributed on Amazon's video streaming platform as exclusive shows, according to Price.

Amazon has been clear about what it wants to spend and it knows movie-making costs money, Saxon said.

"I am betting my professional energy that we are going to see a good number of Amazon movies, and I hope mine is one of them," he added. "The movie we're making is going to compete with the big boys."

(Reporting By Alistair Barr; Editing by Peter

Amazon developing its own mapping services

Amazon is developing its own mapping API, the retail giant announced Monday, just days before Apple is set to release its own mapping service to the public as part of iOS 6. The announcement confirms earlier reports that Amazon had acquired 3D mapping application UpNext earlier this summer for that exact purpose.

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Both Apple and Amazon, as well as third-party developers, have until recently relied on Google's Maps API to power location-based applications on iOS and Kindle Fire devices. Apple has also used a native Maps application powered by Google that will not make its way to iOS 6. Amazon's original Kindle Fire did not come pre-installed with any mapping application.

The move further sets Amazon's Kindle Fire devices apart from other tablets that run less customized versions of Android . It's biggest effect will be on developers releasing apps with mapping or location-based features for the Kindle Fire and Kindle Fire HD. Amazon promises the transition will be "easy" for developers, but it's one more step they have to make to ensure their applications run smoothly on Amazon's devices.

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Amazon is also setting the stage for its own location-based advertising business. Amazon is clearly interested in ad revenue opportunities, if the display ads it has plastered on the screensavers of its Kindle e-readers and Kindle Fire tablets are anything to go by.

Interestingly, neither the original Kindle Fire nor its upcoming Kindle Fire HD have GPS capabilities, though many will be able to take advantage of location services using a Wi-Fi connection.

Amazon New Kindle - Amazon's new 7-inch Kindle Fire: twice the RAM, faster processor, longer battery life, $159

SANTA MONICA, Calif. (AP) — Amazon.com Inc. refreshed itsKindle line of gadgets on Thursday. It updated its Kindle Fire tablet computer and announced new stand-alone e-reader models.

The Fire will be an effort to take a larger share of a tablet computer market dominated by Apple's iPad. It could helpAmazon boost sales of digital goods such as e-books and movies.

The event came a day after Nokia Corp. and Google Inc.'s Motorola Mobility division announced five new smartphones between them. The two from Nokia will be the company's first to run the next version of Windows.

Consumer electronics makers are trying to generate interest in their products now, before Apple announces a new iPhone and possibly a mini iPad next week.

The Amazon event took place at a former airplane hangar in Santa Monica, Calif., with CEO Jeff Bezos presiding.

Here's a running account of the event, presented in reverse chronological order. All times are PDT.

___

11:55 a.m.

Just before the event ended, Amazon unveiled another Kindle Fire model, one with the ability to connect to the 4G cellular networks that phone companies are building. It will cost $499 and come with 32 gigabytes of memory and an 8.9-inch screen. A data plan will cost $50 a year.

___

11:50 a.m.

Amazon is revealing prices for the HD models. A 7-inch model will sell for $199 and ship next Friday. An 8.9-inch model will go for $299 and start shipping Nov. 20.

Amazon has pursued a strategy of selling lower-priced tablets at thin, if any, profit margins in order to boost sales of digital items from its online store. It's akin practically giving away shavers to sell razor blades later.

___

11:40 a.m.

Amazon unveiled a slew of other features.

There's "Immersion Reading," where Kindle books can be synchronized with Audible audiobooks. It lets you read and listen at the same time.

There's also "X-Ray for Movies" on the Kindle Fire HD, where you can tap the screen at any time to find out who the actor is. That uses the IMDb database service owned by Amazon.

"Whispersync for Games," meanwhile, will let you pick up where you left off when playing games.

The Fire will also come with parental controls, adjustable by content. A kid may have free reign on books but have limits on games, TV and movies, for instance. Different time limits can be set for different kids.

There's also a front-facing camera for the first time, and it can be used with a custom app for the video chat service Skype. The iPad has two cameras, which is useful for videoconferencing.

___

11:30 a.m.

Amazon is coming out with a high-end version of the Kindle Fire. Called Kindle Fire HD, it will have two Wi-Fi channels for faster transfers. That will be crucial for high-definition movies and other large files, Bezos said.

The HD model will also have more storage, starting at 16 gigabytes, compared with 6 GB for the old Fire. It wasn't immediately clear what the updated basic model will come with. The iPad also starts at 16 GB.

Bezos notes that the operating system takes up about 2 gigabytes, leaving an 8 GB model with just 6 GB.

"For a high-def device, 8 GB is dead on arrival," Bezos said.

___

11:20 a.m.

Amazon is updating its Kindle Fire tablet computer as it steps up competition with Apple's iPad. It will cost $159, down from $199 for the old model. It will start shipping next Friday.

That model will have a 7-inch screen, like the original one, but Amazon also revealed that other Fire models will be bigger at 8.9 inches on the diagonal. That's only slightly smaller than the iPad's 9.7 inches.

"We decided to go big," Bezos said.

The bigger Fire comes as Apple is believed to be working on a smaller version of its iPad, possibly at 7.85 inches.

___

11:10 a.m.

Amazon has introduced a new program called Kindle Serials. The idea is you buy a book once and get future installments automatically, without additional fees. Amazon will reissue Charles Dickens' "Oliver Twist" in serial form, for instance.

Amazon's stock hit its highest level ever Thursday, $252.28. The stock was up $3.42, or 1.4 percent, at $249.64 in afternoon trading during the announcement.

___

11:05 a.m.

Amazon is dropping the price of its low-end Kindle to $69, from $79. That will start shipping next Friday.

It's also unveiling a new feature that times your reading speed and tells you how much time you need to finish the chapter and the book.

___

11 a.m.

The first of the products Amazon unveiled wasn't the Fire tablet, but a stand-alone e-book reader. It has a black-and-white screen and is called Paperwhite.

It promises 25 percent more contrast. Bezos said "the whites are whiter, and the blacks are blacker."

The Paperwhite has a light source. Bezos says the device is "perfect in direct sunlight." Tablets such as the iPad and the Fire don't work as well in bright light because they are lit from the back. Bezos says the light on the Paperwhite is directed down at the display.

The device promises eight weeks of battery life, even with the light on.

It costs $119 and starts shipping Oct. 1. Amazon says it will start taking orders Thursday. There's also a model with 3G cellular connections for $179.

___

10:50 a.m.

Bezos has begun to talk about the Kindle Fire. He called it a service rather than a gadget — a reference to the fact that the tablet is about selling movies, TV shows and other digital content fromAmazon's store. Just a few days earlier, Amazon had announced a new content distribution deal with pay-TV channel Epix.

"People don't want gadgets anymore," Bezos said. "They want services. They want services that improve over time. They want services that get better."

___

10:45 a.m.

The music stops. An Amazon ad appears on screen, and Bezos appears on stage wearing a dark blue suit and a white shirt, with no tie.

"We love to invent," Bezos declared.

___

10:30 a.m.

The hangar is crammed with about 200 journalists awaiting the announcement. It's draped in black velvet as "Show Me The Light" by the Mystery Jets plays. Amazon's logo is on a huge screen at the front.

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Amazon has just emailed out an invite for a press conference to be held the morning of Thursday, Sept. 6, in Santa Monica, Calif.

Amazon rarely holds press conferences beyond its annual press conferences in New York to introduce new models of its Kindle Fire and Kindle line of E-Ink e-readers each fall. The fact that the company is holding one in L.A. suggests that it's a big entertainment-related announcement --perhaps something to do with its Instant Video service for Amazon Prime subscribers. Amazon has been bolstering its content offerings in that department over the past year, signing numerous deals with the likes of MGM and Warner Bros . Still, its content catalog has a long way to go before it could be seen as a viable competitor to longer-running streaming subscription services such as Netflix and Hulu Plus .

Amazon launches video game development push

We should have figured that with Amazon getting involved in making TV shows , it was only a matter of time before it branched out into another form of entertainment: computer games. The retailer has launched its own game development unit, called Amazon Game Studios, to create social games for Facebook.

Its first title, Living Classics , is a hidden object puzzle game in the vein of Gardens of Time. Fittingly, it lets you pore over scenes from classic literature such as "The Wizard of Oz" and "Alice in Wonderland" in an effort to pick out hard-to-spot objects and earn points. In addition to hidden objects, the game mixes things up by giving you other challenges, such as finding all of the moving objects in a scene.

There's no word on what Amazon Game Studios will be doing next, but the company is hiring more game development staff. We wouldn't be at all surprised if it eventually goes on to create exclusive titles for Amazon's Kindle Fire.