Hearst, which has seen its own revenue plummet as advertisers shift an increasing amount of their spending to the Web, is planning to launch an e-reader with a large-format screen this year, Fortune magazine reported Friday. The device would be big enough for the layout and advertising requirements of newspapers and magazines.
Hearst executives declined to provide details of the business model behind the e-reader, but analysts agree that the publisher's bold move is a necessary, if risky, experiment. Even if Hearst is unsuccessful in making money off its first attempt, what it learns can help it eventually find the right answer to reverse shrinking subscriber bases, as well as revenue losses from publications. The latter is reflected in Hearst's recent announcement that the company may close the San Francisco Chronicle, unless it gets concessions from unions. Such a closure would leave the city without a major daily newspaper.
"This is absolutely the kind of thing they have to be doing -- experimenting," Michael McGuire, an analyst within Gartner's media consulting business, said of Hearst's e-reader. "There are no set answers anymore."
Which is not to say Hearst will be successful in reversing the downward trends immediately. "It's tough because there's going to be a lot of experiments [by publishers] that won't work," McGuire said.
Hearst's entry into the e-reader market would come at the heels of Amazon.com's success with the Kindle, a wireless reader that gives buyers access to the online retailer's site to download and read books and newspapers and magazines. The device, introduced in November 2007, is one of Amazon's best-selling consumer electronics. Analysts, however, say the gadget's $359 price tag is likely to keep it out of the mainstream market and attractive mostly to traveling professionals who prefer not to carry around lots of books and periodicals.
Hearst has its best chance of striking a chord with the majority of consumers if it includes its e-reader at no additional cost with a multiyear subscription to the publisher's magazines and newspapers, McGuire said. To make the device even more attractive, it should have a Web browser to access other content and include additional capabilities, such as the ability to share content with others over the Web.
Selling the device separately would require a device so compelling "that people say that's how they'll want to consume newspapers in the future," McGuire said. "That's going to be tough."
Of course, the cost of developing and then hiring manufacturers to build a device that's given away may be too great to make a profit through a content subscription. No matter which direction Hearst takes, its approach will be closely watched.
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