CDs Find Their Way Into Papers

In recent months, IMedia International Inc. has reached agreement with two of the nation's largest newspapers to distribute within their Sunday editions CDs chock-full of movie previews, music samples, video games, comics, celebrity interviews and advertisements.

"This brings sight, sound and motion to the newspaper," said IMedia Chief Executive David MacEachern.

It also could bring additional advertising dollars -- and perhaps hard-to-reach younger readers -- to newspapers at a time of declining readership. IMedia and its partners -- the Dallas Morning News and the New York Daily News so far -- hope that newspaper readers will pull the discs from their Sunday papers and insert them in their computers to enjoy the freebies. That would allow the partners to sell as much as 700 video and "banner" advertisements on each edition of the CD.

MacEachern hopes to distribute the monthly CD, entitled "Hollywood Preview," to 10 million homes by the end of 2007. That is up from about 1.4 million CDs that will be distributed once both newspaper partners are active. The New York Daily News recently agreed to begin in October to deliver the CDs, which have glossy, magazine-style covers.

Executives at the Dallas Morning News said they were pleased with initial results since they began in April to pack IMedia's discs into the Sunday paper once a month.

"It was a gamble for us to do this," said Bernie Heller, vice president of advertising for the Morning News. "I'm not ready to say it will definitely pay off in the long run or that my advertisers will embrace it. But so far it looks really good."

After covering the roughly 35 cents to produce each disc and its jacket, the newspapers and IMedia will split the next dollar of advertising revenue evenly, MacEachern said. Additional ad revenue, which eventually could reach $2 per disc, will be split 80%-20%, with the greater share going to the newspapers, he said.

That $2 could translate into an additional $7.7 million a year in advertising for a paper such as the Dallas Morning News, based on its monthly rollout to 625,000 home subscribers and newsstand buyers.