Switching Printer’s Ink for E-Ink Won’t be Easy

A top publisher’s plans to develop an e-reader device and a digital content model could rescue and revive print publications financially hobbled by increasing operational costs and declining ad channels.

Unfortunately, it’s just not going to arrive in time to save many publications on the brink of extinction, as there are formidable challenges to overcome, according to industry experts.

Hearst, the top U.S. magazine publisher and owner of 16 daily newspapers, plans to launch an e-reader device sometime this year, according to Fortune magazine. The unit, according to Fortune, will feature a display screen larger than the one used by Amazon’s Kindle but would be built on the same E-Ink display technology that powers Kindle and Sony’s e-reader products.

The news comes at a tenuous time for publications as many are moving toward bankruptcy or being placed on sale and auction blocks as high production and delivery costs can no longer be supported by declining advertising and subscription revenue.

Hearst, which did not return calls by press time, is no stranger to the dismal scenario. Its San Francisco Chronicle will be sold or closed this year if cost-saving measures prove unsuccessful. The Chronicle lost more than $50 million last year, and expectations are that 2009 will be worse. In early January, Hearst also announced it was putting the Seattle Post-Intelligencer newspaper up for sale.

Industry analysts say an e-reader strategy would be a viable option for Hearst, but are quick to point out there are technology and cultural issues blocking industry adoption.

“Yes, this is a significant development that could save the print news business, which is barely surviving today,” Rob Enderle, principal analyst at The Enderle Group, told InternetNews.com.

“It would cut the overhead costs of the equation and open up potentially new ad models,” he added. One approach would be two subscription options: one with ads, and another, higher-priced subscription for pages without ads, he noted.

The big trick, said Enderle, will be convincing today’s readers to use electronic devices for daily reading purposes.

Amazon is making the biggest inroad in that direction today. The e-tailer just launched the second generation Kindle earlier this month and has stated the device now represents 10 percent of its electronic sales revenue.

Kindle users have access to a long list of newspapers and magazine subscription options but its Amazon’s book catalog, which now boasts 230,000 titles, that is credited for luring users. Amazon’s CEO Jeff Bezos has said repeatedly that his aim is to make Amazon’s millions of books — as well as every book in the world — available for its e-readers.

Next page: The challenges ahead.

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The e-reader is proving successful, said analysts, as it is as close to replicating a book-based reading experience.

But even Amazon’s Bezos, during a recent Charlie Rose appearance, noted that e-tailer hasn’t yet tapped what it believes is its biggest potential user base — the true book lover.

Enderle said the same challenge faces newspapers and their readership. “We are creatures of habit and the trick will be getting users to do something different. Publishers have to do something aggressive to make that happen,” he said.

A technical hurdle is that replicating newspaper formats may not be as easy as replicating the book experience. Newspapers, by nature, are heavy on visuals and color. Color technology isn’t yet possible with E-Ink.

“Today’s e-book devices are not especially well-suited to consumer magazines since they feature relatively small, grayscale screens,” Ross Rubin, a NPD analyst, told InternetNews.com.

While Hearst’s device will reportedly boast a bigger screen than the Kindle, Rubin envisions needing even a much bigger display for magazine format and design needs.

“It is also an open question as to whether consumers would prefer a digital version of a magazine with the layout intact, or simply a Web version of that publication that is more optimized for digital reading,” he said.

And while one publisher’s e-reader could help its own business effort, neither analyst believes Hearst, or any other big publisher, has the expertise to push e-readers out into the industry as a device player.

“And it’s untenable for every major magazine publisher to offer his or her own e-reader,” noted Rubin.

The effort, said Enderle, will require a technology player with the production and channel resources that individual publishers just don’t have.

One potential vendor could be HP, as it already has deep roots within the traditional publishing venue. According to Enderle, HP has an e-reader device in prototype. HP did not return press inquiries by press time.

“They have the production scale to step into this opportunity,” said Enderle.

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