The New York TimesThe New York Times TechnologyAugust 5, 2002  

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Downloading Magazine Replicas

By BOB TEDESCHI

TECHNOLOGY REVIEW magazine plans to announce a new service today that enables users to download an exact replica of the magazine to read at their leisure, placing the magazine among a fast-growing crowd of publications using this form of online distribution.

Compared with typical Web publishing, which uses formats designed specifically for reading on a computer screen, Technology Review and other publishers are transmitting electronic copies of their printed pages. Publishers see this service — variously called digital delivery, digital replicas or electronic editions — as a way to build both advertising and circulation revenue when few companies have been performing well in either category. And since digital delivery incurs negligible additional costs beyond the print version, publishers are greeting this new technology with an attitude of "why not?"

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"There's an awful lot we don't know about how readers will respond in the long term," said Bruce Journey, the chief executive of Technology Review. "But since our fixed costs are nonexistent, it looks like a great business model, particularly if we can scale it."

The modes of digital delivery vary, but the method used by Technology Review fairly represents the norm. When readers subscribe, they download software that enables them to open the magazine file. When the magazine arrives by e-mail, users download it and read the pages on their desktop or laptop computers, or print them out. Among other features, readers click an arrow to turn the page, and they can search through the document using keywords.

In the month since Technology Review began testing the service in earnest, Mr. Journey said, the magazine has signed up 3,000 international readers — a 20 percent increase in the its foreign subscriber base, and fully 30 percent of the first-year goal for digital subscriptions. Subscribers pay $30 annually, which is the same as the printed version in this country. But for overseas subscribers, who pay $64 a year for the magazine, the digital version is much more affordable.

Mr. Journey said his company earned about 30 percent more profit on digital subscriptions than printed versions, because of the lower costs of distribution — which in the case of Technology Review is done by a company called Zinio Systems.

Like most magazines employing modern printing technology, Technology Review already sends a digitized version of each issue of the magazine to the printing plant. Zinio simply takes those files, compresses them and adds other user features, before sending the digital edition to subscribers by e-mail. Mr. Journey would not give specifics about costs or revenue an issue, but Zinio charges magazines about 50 cents a copy for the service — about half the average cost of paper, printing and physical delivery of a typical magazine, according to Zinio's president, Mike Edelhart.

In seeking a market among foreign readers first, Technology Review is demonstrating one of the chief strengths of this feature: publishers can get copies to distant readers without making them wait weeks for postal delivery or risk having the issue arrive battered beyond recognition.

But Mr. Journey, like other publishers, expects to see a fair amount of interest among young readers in this county, as well, since they already receive so much of their information in pixels instead of ink.

While only a handful of magazines now offer this service, including PC Magazine and The Harvard Business Review, about 60 newspapers are delivering digital replicas to readers in one form or another, according to analysts. Those include The Globe and Mail, The International Herald Tribune and The New York Times. And Dow Jones is looking into the service for its flagship publication, The Wall Street Journal, according to Michael Ahern, vice president for operations at Barron's, Dow Jones's weekly financial publication.

"Dow Jones started looking at this about six months ago, mostly for The Wall Street Journal, but they weren't sure if they wanted to start with The Journal, so we're the test pilots," Mr. Ahern said.

He said the company was interested in the service mainly "for its timeliness," since remote Barron's readers cannot get each issue when it is published on Saturday. While the same information is available on Saturday to online subscribers, "this will tell us if people want to read it in the print format, as opposed to searching the way they would on the Web site," Mr. Ahern said. "And there's little or no risk, in that we're not investing any money to do this."

Another feature that publishers like about digital subscribers is that, unlike Internet readers, they count toward a company's paid-circulation figures. Those numbers are critical, not just for sales revenue, but for the added advertising revenue they can engender.

The New York Times, which last October became one of the first newspapers to roll out such a service, now has roughly 3,000 digital delivery subscribers, who pay $26.80 a month. Scott Heekin-Canedy, the senior vice president for circulation at The Times, said that the company expected to add several thousand more subscribers to the service by the end of the year and "to add approximately $1 million in annual incremental subscription revenues" from the electronic edition.

The Times is more heavily involved in the digital delivery business than many other publishers, as it holds a minority stake in Zinio's chief competitor, NewsStand, a company based in Austin, Tex. According to NewsStand's chief executive, Kit Webster, his company is now distributing electronic versions of 24 different publications — mostly newspapers — and has signed contracts with another three undisclosed companies.

Like Zinio, NewsStand charges a per-unit fee, which Mr. Webster would not disclose. The company also receives an undisclosed bonus for each new subscriber who signs up through its own Web site, NewsStand.com. Like Zinio, the company is not yet profitable, although Mr. Webster predicts it will be next year — a forecast that Zinio executives also make for their company.

While these companies and others, like Qiosk, have made inroads with publishers and some consumers, they still have a long way to go to attract mainstream readers, said Vin Crosbie, managing partner of Digital Deliverance, an electronic publishing consulting concern. "For the consumer market, this model is a little early, because you need broadband to take advantage of it," Mr. Crosbie said.

Broadband, or high-speed, Internet connections certainly help. Compared with the 15 to 30 minutes it can take to download a Zinio magazine through a modem, a broadband user would need only a minute. With NewsStand, modem downloads can take an hour — for The New York Times on Sundays, for instance — versus a few minutes with a faster connection.

So far, though, many more people in this country have modems than they do broadband connections. By the end of this year, about 53 million households in the United States will have modem Internet access, versus 15 million households with broadband, according to Jupiter Research. Even if broadband connections double as forecast in the next three years, they will still be outnumbered by modem connections, Jupiter predicted.

Mr. Webster of NewsStand acknowledges that an increase in broadband usage will help sales, but he noted that 30 percent of the company's current subscribers used modems. "So if they can't get the publication at all or in a timely manner, getting it slowly is an attractive alternative," he said.

Advertisers, meanwhile, may like digital delivery for reasons other than the increased number of readers it attracts. Mr. Journey, of Technology Review, said that since audio and video files could be delivered in the electronic versions of the magazine, "advertisers could embed an audio message from their C.E.O. in the ad." The quality of the downloaded multimedia, he added, is superior to any online experience.

Given the paltry number of digital subscribers, such a scenario could take a long time to come to fruition, said Edward Padin, managing associate of the Publishing and Media Group, a consulting firm in Manhattan. "In the near term, the time and money it will cost an ad agency to create that video will far outweigh the return they'll see, in reaching that small number of digital readers," Mr. Padin said. "So while it's an intriguing concept, it's still in the very early stages."




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Gregg Matthews for The New York Times
Tony Perry, a Lockheed Martin employee, shows off a digital copy of Technology Review.


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