By Frank Ahrens
Washington Post Staff Writer
Friday, July 28, 2006; D01
No longer content to remain in the online retail market, Amazon.com is heading into the movie business, even as the company's profit projections disappoint and its stock tumbles.
The Seattle-based giant -- which launched in 1995 as a bookstore and is now the world's largest online retailer, selling everything from breakfast bars to ball bearings -- has purchased the rights to turn the best-selling novel "The Stolen Child" into a feature-length film.
The move into multimedia comes only days after Amazon reported second-quarter earnings were down nearly 60 percent compared with the same period last year, despite a rise in revenue and traffic. It was the sixth consecutive quarter the company showed a decline in profit, sending the company's stock price down 22 percent Wednesday in Nasdaq trading.
Amazon did not disclose how much it paid author Keith Donohue for the movie rights. The deal, which has caused many analysts to scratch their heads, follows other investments in content and technology that have been criticized. Amazon recently said, for instance, that it was moving into the grocery business, typically a low-margin arena.
Even as Amazon struggles financially, it continues to morph. In order to bring more traffic to its Web site and hold visitors longer, Amazon has begun offering original content, following the lead of other Web sites. Last summer, to celebrate its 10th anniversary, Amazon streamed a live show on its site featuring comedian Bill Maher and a performance by Bob Dylan.
The company recently tapped Maher to host "Amazon Fishbowl," an interview program streamed on the Web site with such bands as Soul Asylum and authors such as Donohue.
The debut novel by Donohue, who lives in the Washington area, concerns a young boy who is kidnapped by hobgoblins and replaced with a changeling. Two narrators tell the parallel stories of the young human living with the mythical creatures while the impostor learns the ways of humans. The novel was inspired by an 1886 poem by William Butler Yeats.
The book, which was published in May by Nan A. Talese/Doubleday, a division of German media giant Bertelsmann AG, was slow to be reviewed by mainstream outlets. But Amazon sent galleys to 100 of the site's top customer reviewers, who lauded it. That helped propel the book to the top of Amazon's fiction list, much the way bloggers and other non-mainstream media outlets such as YouTube create groundswells of their own. Positive reviews followed, in The Washington Post, USA Today and elsewhere.
Amazon also placed more than 2 million sticker ads for the book on the sides of boxes shipping other books to Amazon customers, said Nan Talese. Amazon did not require the publisher to pay for the advertising, she said, though many bookstore chains do charge publishers for prime placement in their stores. Also, the publisher flogged the book on fantasy blog sites. "We do as much guerrilla marketing as we can on the Internet," Talese said.
The book has sold more than 30,000 copies, an impressive figure for a debut novel by an unknown author. Amazon hopes to translate that success to the movie screen. The company is seeking studio partners that would produce and distribute the movie, but would not name studios it is talking to.
If the film is made -- far from a sure thing -- Amazon would use its platform to market the movie and sell DVD copies. The book's fantastical story line could play well on the screen, thanks to special effects, and might be able to tap into the audience that turned the "Harry Potter" and "Lord of the Rings" novels into blockbuster films.
"People like the book, and we wanted to listen to our customers who were passionate about it," said Amazon spokesman Andrew Herdener. "We wanted to make sure an equally great movie was made from the book."
Donohue, who works for the federal government, said he was skeptical when his literary agent asked to send galley copies to United Talent Agency in Hollywood, which had worked with Amazon on the Maher project.
"I would hear from time to time, it's at this production company or that production company," said Donohue, who calls his book a psychological fairy tale. "I kind of dismissed all of that. It's all kind of mysterious to me."
Amazon ended up buying the film rights because the company "bit so hard" on the book, Donohue surmised. He also noted: "I've been a customer since 1995 when they first started, and I've been kind of interested in how they expand and contract and go in different directions."
Donohue would not disclose how much he was paid for the rights to his book, but offered, "I'm still here," meaning his day job.
As for Amazon, the company's woes also include a recent lawsuit loss to Toys R Us Inc., which ended Amazon's exclusive rights to sell the company's toys on the Web. Analysts say Amazon is over-investing in technology and content and that the company's recently announced price-slashing may not make up lost profits.
For instance, Safa Rashtchy, an analyst with Piper Jaffray & Co., lowered his rating on Amazon shares from "market perform" to "underperform." Shares of Amazon closed up 30 cents, at $26.56, yesterday.
"Amazon.com remains heads-down focused on creating the best possible experience for our customers and to helping them find, discover and buy anything online," Herdener said. "This is our goal with 'The Stolen Child.' "