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Amazon's Kindle has a big job: saving the newspaper industry

TECHNOLOGY

The launch of its newest e-reader comes with a deal that could motivate users to pay for subscriptions.

May 07, 2009|Alana Semuels

It's not even 10 inches tall, it's just one-third of an inch thick, and it costs nearly $500.

But Amazon.com Inc.'s Kindle DX, unveiled Wednesday, has already been assigned a huge job: reversing the fortunes of the struggling newspaper industry.

After announcing the features of the new device, which include a bigger-than-ever screen and a PDF reader, the Seattle company also revealed a partnership with Washington Post Co. and New York Times Co. that would allow consumers living outside the newspapers' delivery areas to get discounted Kindles if they agreed to subscribe to the Times, the Post or the Boston Globe on their device.

The partnership could be considered a bid by the newspapers to get readers to begin paying for content again, after seeing many of their readers migrate online and cancel their subscriptions.

"Newspapers are reaching the end of their rope," said Sarah Rotman Epps, a media analyst at Forrester Research. "The e-readers are looking like newspapers' last best hope."

The new Kindle features a 9.7-inch screen, compared with 6 inches in the previous model, and can store about 3,500 books. Amazon pays for the wireless connectivity, so buyers don't have to purchase separate phone or broadband service. But at $489, it's $130 more than the previous model and priced higher than some computers.

Still, some consumers prefer Kindle and other so-called e-readers to scanning websites on their laptops because the display mimics the experience of reading print on paper. The devices are also more portable than laptops, allowing readers to tote them almost anywhere they'd carry a newspaper, book or magazine.

The New York Times and the Washington Post declined to disclose how much the devices would be discounted for subscribers who sign up through Kindle. But similar programs are being discussed by newspapers around the country as they look for ways to stem the decline in readership and advertising dollars.

The Detroit Free Press and the Detroit News, which in March stopped delivering newspapers four days a week, are looking into helping readers who subscribe to the papers lease devices from e-book maker Plastic Logic of Mountain View, Calif.

The Los Angeles Times is also "in preliminary talks with several companies to provide discounted e-readers to consumers who agree to subscribe to the paper," said Times Publisher Eddy Hartenstein.

For newspapers, the advantages of e-readers are obvious. They save on printing and delivery costs and can reach readers outside the newspapers' normal delivery areas.

"It does change your business model," said Janet Hasson, senior vice president of audience development at the Detroit Media Partnership, which provides business management for the two papers. "The No. 1 cost for newspapers is newsprint and distribution expenses."

The service also requires readers to purchase a subscription. Amazon currently charges $5.99 to $13.99 for monthly Kindle subscriptions to newspapers such as the Los Angeles Times and the New York Times.

Eventually, newspapers hope also to run ads on e-book readers, potentially charging print advertising rates. One of publishers' biggest complaints about online advertising is that it hasn't commanded very high prices because there is a limitless number of Web pages where advertisers can buy space.

"We think that advertising is very important to the publishing business in general. It's a great additional way for newspapers and magazines to replace customers," said Daren Benzi, vice president of business development at Plastic Logic, which is releasing an e-reader geared toward business professionals in early 2010.

Still, adoption of the devices is key. The high price tag might slow down the transition. Forrester Research estimates that Amazon and Sony Corp., maker of the Sony Reader, sold about 1 million readers by the end of 2008 and that the market for the devices is around 5 million consumers.

That's not enough subscribers to help newspapers, said Epps, the Forrester analyst. The devices might assist in another way, though, by getting readers accustomed to the practice of paying for subscriptions again. Consumers have already shown a willingness to pay up to $10 a month for a newspaper subscription on Kindle, she said.

E-readers will also have to compete with the iPhone and other smartphones that allow consumers to read books without buying an expensive new device. In March, Amazon released a free application that lets iPhone users read e-books purchased at Kindle's store.

Amazon doesn't seem worried that the Kindle won't take off. At a news conference Wednesday, Amazon Chief Executive Jeff Bezos said Kindle sales made up 35% of Amazon sales for books for which Kindle editions were available.

"It's meant for people to read. It's light, it feels good in your hands. You don't notice it's there. It doesn't beep at you, it doesn't get warm in your hands," he told reporters.

Amazon is also working on another segment of the consumer market: college students.

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