Advertising Council

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NEW YORK, Oct. 27 /PRNewswire/ — The Advertising Council (www.adcouncil.org), America’s leading provider of public service advertisements since 1942, announced today a first-of-its-kind partnership with Zinio (www.zinio.com), the world’s leader in digital-content design and distribution, and Hearst Magazines, one of the world’s largest publishers of monthly magazines. The collaboration with Zinio will enable the Ad Council to take its influence and innovation to a new level, creating a suite of digital, interactive PSAs and other products. The offering will allow Hearst Magazines to extend their reach to digital readers with the unprecedented freedom to place PSAs without concerns of exceeding advertising allocations.

“The Ad Council has a long history of inspiring the American public and effecting positive change,” said Peggy Conlon, President & CEO, Ad Council. “Partnering with Zinio helps raise awareness of our campaigns and all of the work that we do by featuring our messages in an innovative way in the digital world.”

Under the terms of the exclusive partnership, Zinio will create interactive digital editions of the Ad Council’s PSAs that will interweave radio and video, using its proprietary format. As a result, the Ad Council can disseminate multi-layered public service messages that are more engaging, while enabling Zinio to utilize its technology to create digital PSA catalogues and annual reports for the council. All 12 of Hearst Magazines’ digital publications, including Cosmopolitan, Seventeen and others, will be the first digital publications to deliver public service messaging to their readers in this groundbreaking manner.

“One of the greatest assets of digital publishing is its ability to reach the generation of ’screen-agers’ — young people who have spent their entire lives digesting information online,” said Rich Maggiotto, President & CEO, Zinio. “By partnering with the Ad Council, Zinio helps play a critical role in communicating with America’s youth in a language and medium that resonates best with them.”

In addition to Zinio creating digital versions of Ad Council PSAs, they also will work together to promote awareness of digital publishing. Zinio will take steps to integrate digital PSAs into magazine titles currently available on its newsstand, and the Ad Council will include digital PSAs into publications with which it already has existing relationships.

About the Ad Council

The Ad Council (www.adcouncil.org) is a private, non-profit organization that marshals talent from the advertising and communications industries, the facilities of the media, and the resources of the business and non-profit communities to produce, distribute and promote public service campaigns on behalf of non-profit organizations and government agencies in issue areas such as improving the quality of life for children, preventive health, education, community well-being, environmental preservation and strengthening families.

About Zinio, LLC

Zinio is revolutionizing reading. Through digital products and services, the Company creates better ways for people to discover published content, get more of it and do more with it. Zinio works closely with publishers worldwide to reinvent reading. For consumers, Zinio enables the ability to shop for, search inside, read, share and save digital content in new ways and on many devices. With over 50,000 digital magazines and books, and e-stores localized in 15 languages, zinio.com is the largest online newsstand in the world. Founded in 2001 and privately held, Zinio is headquartered in San Francisco and has offices in New York, London, Paris, Barcelona and Taipei.

About Hearst Magazines

Hearst Magazines is a unit of Hearst Corporation (www.hearst.com), one of the nation’s largest diversified communications companies with interests in magazines, newspapers, digital media, business media and television. As one of the world’s largest publishers of monthly magazines, Hearst Magazines publishes more than 200 editions around the world, including 15 U.S. titles and 20 magazines in the United Kingdom, published through its wholly owned subsidiary, The National Magazine Company Limited. Hearst reaches more adults than any other publisher of monthly magazines (70.6 million total adults, according to MRI, Fall 2008).

Through its digital media unit, Hearst Magazines operates 25 Web sites and nine mobile sites for brands such as Cosmopolitan, Esquire, Good Housekeeping, Marie Claire and Seventeen, as well as non-magazine brand sites such as Delish.com, a food site in partnership with MSN; TheDailyGreen.com, MisQuinceMag.com and RealBeauty.com. Hearst Digital has also acquired Q&A platform Answerology.com; teen sites eCRUSH.com and eSPIN.com; social shopping site Kaboodle.com, and consumer health site RealAge.com.

    CONTACTS:
    Beth Shanley
    Ad Council
    bshanley@adcouncil.org
    212.984.1923

    Lisa Hagendorf
    Zinio
    Lhagendorf@zinio.com
    646.383.4050

SOURCE Zinio

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ADOTAS - The room didn’t shake literally, but some kind of metaphysical ripple passed through the audience as the panelists lumbered on stage at DPAC4. These were the media moguls — The Wall Street Journal, NBC/Universal, Turner Entertainment, Reuters and Zinio — or rather their representatives, on stage to discuss the state of digital content and online advertising.

Subscription products have been the latest rallying cry of publishers, with News Corp.’s Rupert Murdoch leading the hollering. Fittingly, The Wall Street Journal online is the most notable publisher to make paid content work. At the same time, Brian Quinn, vice president/general manager of digital add sales for the Journal Digital noted that its BlackBerry application is free while the site is opening up more content to nonsubscribers.

“We’re not in the business of making content to give it away,” added Walker Jacobs, senior vice president of new media ad sales for Turner, “but the question is ho do you make money on it online?” Turner has found success with subscription services for special features related to sports coverage.

However, Peter Naylor, senior vice president of digital media at NBC/Universal suggested, “This past year we’ve been too focused on price instead of audience and the audience has leaped ahead of us.” Hence why the media all stars need to investigate employing content on as many platforms as possible. “Audience should matter far more than price.”

But content owners are anxious about the numerous platforms available and different distribution channels, commented Jeanniey Mullen, executive vice president and global CMO for Zinio and VIVmag. How many times will a user pay for their content? she pondered.

Ubiquity is the goal, the panel agreed, but information overload is a problem for everyone on all sides of the fence — publishers, advertisers and readers alike.

The moguls see value on the advertising front in contextually relevant content in advertising. Jacobs noted that Turner sees a great return from relevant ads in sports programs, such as Armor All banners on the NASCAR page. Quinn noted that WSJ.com is planning to run an educational series on options trading from an advertising partner. The editors at the site have given it two thumbs up.

Alisa Bowen, senior vice president and global head of consumer publishing for Reuters, noted that advertising partners can be handy when trying to build content that increases engagement.

“Many people think of advertising as an annoyance, but we see it as a complement,” she said. “Consumers are smart — as long as sources are labeled and they get something out of it, they’re fine with advertising.”

On the other hand, there was little love for selling “underbelly” inventory to ad networks.

“Ad networks don’t really make a material difference and poorly placed ads can subtract from a brand,” Bowen said. “It doesn’t make sense for the big names to play ball.”

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Plastic Logic has given a name–but not a launch date–for its forthcoming e-reader.

The e-book reader, which can display electronic books as well as PDFs, PowerPoint, and other business documents, will be dubbed the Que, the company is announcing this week. Plastic Logic said it will show off the Que at the Consumer Electronics Show in January, at which time it will announce pricing, availability, and other details.

The product was originally slated for launch this year, but the company said in March that it would not arrive until early next year.

As previously detailed, the Que will have both Wi-Fi and a connection to AT&T’s wireless network and is about the size of an 8.5-inch-by-11-inch pad of paper.

The big question facing Plastic Logic is how much of its thunder will have been stolen by the time it launches. Since the company first showed its prototype last year, Amazon has updated the Kindle and introduced a larger-screen Kindle DX, while Sony has also enhanced its product line.

“We’re not worried about that at all and I think the main reason is that our reader is so different,” Plastic Logic CEO Richard Archuleta said in an interview. “We haven’t seen anybody even come close to what we’re doing with our product.”

Archuleta noted that the Que has a bigger screen that the Kindle DX and also has a user interface that lets users easily jump around within a document and among multiple documents.

Barnes & Noble, which powers the Que’s bookstore, is widely expected to debut its own e-reader at an event in New York City on Tuesday.

In addition to Barnes & Noble, Plastic Logic also has content partnerships with USA Today, the Financial Times, Zinio, LibreDigital, and Ingram Digital.

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The co-branded digital newsstand will showcase titles like Elle, Parenting Early Years, Popular Science and Woman’s Day. Many of the subscriptions are at slight discounts from the going rate. Back issues of some titles are offered for as low as 94 cents.

Digital magazines have raised their profile in recent months as many publishers start looking for alternative, cheaper modes of distribution. The manufacturers of the digital magazine platforms would like to see their formats associated with the emerging market for portable e-readers, but it is still unclear how the two fit together in these models. The current e-ink technology driving the Amazon Kindle, Sony reader and its upcoming rivals simply are not capable of showing magazines off very well. And while the Amazon Kindle allows for direct subscription and wireless downloads of more than a score of titles, these magazines are formatted specifically for that device.

Digital magazine providers have partnerships with device manufacturers, and when we spoke to Zinio chief marketing officer Jeanniey Mullen last month about the models, she said the company has a buy-once, read-everywhere idea in mind. “Zinio’s comprehensive device vision is the belief that as the consumer you should only need to buy the digital version of the pub one time and have the freedom to access it on every device on an ongoing basis,” she says. “We have built the technological integrations for all platforms, from cell phones to e-reader to TV set.” Zinio’s intention is to let the user log into their Zinio account from any device and get their subscribed content in formats that adapt to the screen.

Call it the counterpart to the emerging “TV everywhere” model in which cable and premium network subscribers have online and mobile access to all of their TV programming. It remains to be seen whether a “magazines everywhere” model has widespread appeal.

If you have breaking news to share please contact Steve Smith at ssmith@accessintel.com

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While most other Tablet PC manufacturers now have a good year of pen computing experience under their belts, the Fujitsu PC Corporation has a good decade of such experience, over 13 years, in fact. They were there from the start back in the early 1990s. The new Stylistic ST5000 represents Fujitsu’s 20th generation of pen products. No one else comes close to that level of experience. When the Tablet PC was formally introduced in November of 2002, Fujitsu unveiled the ST-4000, the latest and sleekest in a long line of Stylistic pen slates. Essentially replacing the older Stylistic 3500 for most applications, the ST-4000 was well received by Fujitsu’s traditional customers, most of whom do business in vertical markets and do not have to be convinced of the merits of the slate form factor and the pen interface. Fujitsu also became the first Tablet PC manufacturer to offer a reflective screen option (see review in Pen Computing #50) for superior outdoor readability. In the middle of 2003, the T3000 notebook convertible joined Fujitsu’s Tablet PC lineup, making it the only vendor to offer both Tablet PC slates and notebooks. If anything was lacking in Fujitsu’s lineup it was a slate with a larger 12.1-inch screen, the kind that competitor Motion Computing had from the start. With the advent of the ST5000 that wait is now over.

More than just a big screen

The new Stylistic, however, is much more than just a ST4000 with a larger screen. It is an entirely new design that’s even sleeker and more elegant than its well designed predecessor. Despite the 12.1-inch display that offers 43% more viewing area, the new model, at 12.75 x 8.65 inches, itself is barely larger than the older machine, less than an inch longer and about as wide and thick (or thin rather, at just 0.85 inches). Weight went up from 3.2 to 3.4 pounds, a barely noticeable difference. Fujitsu’s engineers quite obviously did a super job packaging the bigger screen into this new model.

All-new technology

The screen, however, is not all. While Fujitsu never switched the ST4000 model to Intel’s newer and more efficient M processors and stayed with the mobile Pentium III instead, the ST5000 comes with a 1GHz ULV (ultra low voltage) version of the Pentium M processor. The M processor, of course, is part of Intel’s overall Centrino technology that includes processor, chipset and wireless LAN. Interestingly, while Fujitsu does use the 855GM chipset with the embedded 855GME video controller, it offers either Intel’s PRO/Wireless 802.11b or Atheros’ 802.11a/b/g wireless LAN circuitry. All-Intel equipped ST5000s get the coveted Centrino sticker whereas those with the Atheros radio have a “Total 802.11 ABG Atheros” sticker. Intel will no doubt soon have 802.11g support, but for now we’d pick the Atheros radio for its greater speed, especially since Fujitsu charges the same for both versions.

On the memory front, the ST5000 uses fast PC2700 333 MHz DDR RAM modules in its two externally accessible slots. Standard memory is 256MB, and that can be expanded up to 2 GB. Customers can select either a 40 or a 60GB disk, both with generous shock absorption. The two USB ports now support the much faster USB 2.0 standard. New also are a Memory Stick/SD card slot and a SmartCard slot. Excellent move! Battery power was slightly boosted from 43 to 47.5 watt-hours which Fujitsu estimates is good for up to five hours of operation. A extended battery is available as an option. It adds a couple of hours of battery life and a bit of length to the unit as the battery slides into, and represents, the side of the computer. There is a bridge battery so you can swap the main battery without powering the computer down entirely, but you do have to drop into suspend mode to do so.

Unlike convertibles, the ST5000 is designed from the ground up to be used as a slate. Icons, writing and controls would indicate that the primary orientation of the ST5000 is portrait. Holding it that way, a number of hardware buttons are placed along the right side of the display. There are also up/ down and pageup/pagedown rockers, and six function buttons–actually five buttons and one function button. Their primary functions are alt/ctl/del, starting Microsoft Outlook, toggling screen rotation, escape, and enter. Hit the function button twice and a very useful Fujitsu control panel pops up. Pressing the function key and then push one of the four buttons brings up programmable functions. The pen has its garage on the upper right, which becomes the lower left when used in landscape mode. A good location.

Durable, not rugged

Like all Fujitsu slates, this one is “durable” rather than “rugged.” What this means is that the machine is well built and can take some abuse, but for extended operation in rough environments you should get one of Fujitsu’s protective cases (Fujitsu offers a leather portfolio, a bump case, a harsh environment case, and a attache case). With the exception of the video connector, all ports and slots are open and exposed to the elements. There are no plugs or doors. That makes them very easily accessible, but, again, a protective case may be needed. We consider this approach reasonable.

A well connected machine

Like all Stylistics, the ST5000 offers all the connectivity most customers need on the job. Here’s what the ST5000 offers in terms of interfaces: Along the left side you’ll find audio in/out, two USB 2.0 ports, a Kensington-style lock, a IEEE1394 “Firewire” port, modem and 10/100/1000 LAN (yes, gigabit LAN), and video. Along the top are the Memory Stick/SD Card combo slot, the PC Card slot, and the very thin SmartCard slot that is on top of the PC Card slot. On the right is just the IR port, and along the bottom nothing at all because that is where the battery is. The backside of the ST5000 is in part covered with suede-like material, which Fujitsu claims disseminates heat and makes the device more comfortable to hold. There are user-accessible compartments that contain the wireless radio componentry and the two memory slots.

Unlike some of the competition, Fujitsu does not offer a snap-on keyboard that doubles as a display cover. Instead, there is a cordless external keyboard (or you can use one with a USB cable). Those who use their Stylistic in the office will probably get the very functional, albeit a bit bulky, office dock. It lets you use the computer in either portrait or landscape mode, something that most others can’t. And you can adjust the viewing angle. The dock also adds three more USB ports, some other ports, and, most importantly, has a media bay that can accommodate your choice of optical drive. It is essentially the same dock as was available for the ST4000 (the 4000 works in it), but it now has a fan for better airflow and cooling.

Viewing angle

A word to about the larger display itself. It is definitely welcome. While most initial Tablet PCs had 10.4-inch displays, it was clear from the start that most (though not all) customers wanted a larger display. Toshiba and Motion, which had such displays, undoubtedly had an advantage there. However, there is one problem with most conventional displays in Tablet PCs: Since they were designed for use in notebooks, the have very narrow vertical viewing angles. You pretty much have to look at them head-on in order to get an acceptable picture. That’s no big deal in a notebook since you can always adjust the display. In a Tablet PC things are different. That narrow vertical viewing angle turns into a much more annoying narrow horizontal viewing angle when the device is used in portrait mode. This phenomenon bedeviled all early Tablet PCs, and it is still there in the ST5000 which we believe uses the same display as the Toshiba Portege 3500 and the Fujitsu T30000 convertible. After having seen the new HP TC1100 and Sharp Actius TN10W which both use BOE Hydis displays with full 160 degree viewing angles in both directions, nothing else will ever look the same. We have no doubt that Fujitsu will eventually offer a wide viewing angle display, but it’s too bad the ST5000 doesn’t have one now. And speaking of displays, the ST5000 will not initially be available with a reflective display for superior outdoor readability as the ST4000 is. A reflective display option should be available in the Spring or early summer, but it will be the smaller 10.4-inch model currently used in the ST4000. Fujitsu says that the reflective technology used in the ST4000 display does not scale up well.

In terms of software, the Stylistic ST5000 comes, of course, with the Tablet PC Edition of Windows XP. It also has Microsoft OneNote, Microsoft Reader, Acrobat Reader, Drive Image SE, Zinio Reader, and the 15-function utility panel. What about price? In years past when pen computers were vertical market-only devices, they always carried a hefty price premium. The advent of the Tablet PC Edition has driven prices down substantially. The ST5000 starts at just US$2,049, a reasonable figure if it were a consumer market device, and a downright bargain for a machine that will still primarily be deployed in vertical market applications.

I have no doubt that Fujitsu viewed the advent of the Tablet PC Edition with some trepidations as it meant new competitors and a push to lower prices. As it turned out, while adoption of the Tablet PC has been slower than Microsoft had hoped, Microsoft’s endorsement and backing of pen technology has probably had a positive impact on vertical market sales, which is precisely what Fujitsu designed this superb new pen slate for. - Fujitsu: www.fujitsupc.com

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When Zinio LLC of San Francisco started in 2001, the concept of reading magazines, books and newspapers on a portable device was being derided as cumbersome and expensive.

But today, with traditional print publishers struggling to keep up with an accelerating migration of readers to online sources and portable devices, the seller of electronic magazines is seeing its business take off.

“People are becoming more receptive toward reading on their screen and reading on cell phones,” said Richard Maggiotto, Zinio’s president and chief executive.

“There’s also a proliferation of new devices out there that’s driving this as well. So it’s a convergence of forces that is happening that makes it a perfect storm,” he said.

While Amazon.com’s Kindle book reader has grabbed most of the recent attention, Zinio has quietly been building its business relying on software that doesn’t require spending more money on a dedicated reading device.

Zinio has developed its own electronic reader software that displays full-color versions of magazines and books on computers and laptops.

The company is now investing heavily to stretch its e-reader to work with Apple’s iPhone and iTouch by September and later to platforms and devices such as Google’s Android, Research in Motion’s BlackBerry and Qualcomm’s Snapdragon.

Zinio has about 5 million active customers and delivers about 3 million electronic magazines and textbooks each month. It offers a catalog of about 1,700 downloadable magazines, from Aviation Week & Space Technology to Zamoof (and) PC World… (Zinio offers titles from Hearst Corp., which publishes The Chronicle.)

Bookseller Barnes & Noble, which two weeks ago launched an expanded e-book store to compete with Amazon, uses Zinio to power its electronic magazine sales and its e-book previews.

He said the company has concentrated on magazines rather than digital forms of newspapers, which has content with a shorter shelf life. But Zinio also offers about 30,000 downloadable books.

Unlike the 16-shades of gray displayed on the Kindle, Maggiotto touts the Zinio electronic reader’s ability to display the same full-color layout that can be found in a magazine, while eliminating the cost of paper, printing and distribution.

Also, publishers can add audio, video, live Web links and other interactive content to articles and advertising in the e-magazines, which can be read offline.

“It’s almost a whole new concept of what is a magazine or what is a book,” he said.

Zinio is owned by the privately held Gilvest LP, an investment firm owned by David H. Gilmour, a hotel and real estate entrepreneur who also founded the Fiji Water beverage firm.

A 2008 report from Gilbane Group, a Cambridge, Mass., technology consulting firm, said the number of publications offering a digital edition increased by 277 percent from 2005 to 2007, while the number of digital subscribers grew from 5.2 million to 13.4 million.

“The market is really getting to the point where I think that Zinio and several other players are poised to do very well,” said Steve Paxhia, Gilbane’s lead analyst for publishing strategy.

The proliferation of new mobile devices that can be used as e-book readers also bodes well for Zinio, he said.

Maggiotto credits Amazon for jump-starting an electronic publishing wave.

“I’m glad that Amazon is getting all this press, but in reality, the market size of people who have a Kindle is so insignificant compared to how many people have an iPhone or smart phone or laptop or a netbook,” Maggiotto said.

E-mail Benny Evangelista at bevangelista@sfchronicle.com.

This article appeared on page DC - 1 of the San Francisco Chronicle

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/07/31/BU3S191RLV.DTL#ixzz0X9bYngLs

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We live in an era of competing, unprecedented—and uncontrollable—claims on our attention. The proliferation of devices, content, social networks, events and random stimuli seems to be at an all-time high and nothing—short of a yoga retreat—offers any rest for the innovation-weary media consumer. We show no sign of slowing down or defending ourselves from this chosen onslaught. In fact, we seem to be on some form of universal, cultural speed trip madly racing around heads down, nearly bumping into each other before looking up just in time to see the new thing.

Death Race 2009 has two contestants. One—the device maker—is represented at the Sprizon Wireless phone store, Best Buys and Apple/AT&T nexus of evil. The other is available on newsstands, on TV, in airports and on all the gadgets sold in aforementioned retail addiction outlets. According to numerous blogs and prognosticating prevaricators, they are in a herculean struggle from which only one will profitably emerge.

So who’s gonna win? The device designers or content providers?

I have no idea, but just when I think that I know who’s going to win, something shiny distracts me. That’s part of being male, so I’ve heard. Device marketers are smart, mightily capitalized and their sexy gadgets never fail to arouse my interest, and my closets are littered with the detritus of successful device marketing efforts. Occasional garage sales have scarcely made a dent in the archaeological record of previous marketing attacks on my wallet. It’s gotten so bad that my office closet was repurposed as a rarely visited “History of late 20th and early 21st century gadgets” exhibit. That’s where previously can’t-live-without devices have gone when I can live without them.

So what are we talking about here? What is a device now? What’s a content provider?

It’s important, for the purposes of this discussion, to define “device maker” and “content provider” before going any further. Some devices: an Amazon Kindle, an iPod, a Sony eBook, a traditional book, a stone tablet, a DVD player or “netbook.” A TV fits this model, and so does satellite and AM/FM radio or anyone who manufactures a proprietary format that delivers content to end-user. Newspapers and magazines qualify as devices, but their universality—and nonproprietary technology—eliminate them from true device-hood.

The definition of a content provider seems slightly more simple, but that’s dangerous deception. Content provider could mean a blogger, a journalist, a subscriber who comments on a Web site, a television network, a Web site editorial staff, an author or editor or an RSS feed. Advertising is among our most enduring content, and the artists employed in ad agencies produce some of our most compelling content, much of which subsidizes the editorial we spend more time on. But how about the designer of an app? Or video game? Or an e-book or podcast? I would qualify anyone who produces something worthy of a copyright to be a content provider—anyone who would earn a commission or a royalty. Add Microsoft to the list of content providers—indeed, they are perhaps the preeminent content provider of our time, the failure of Encarta notwithstanding.

So who’s missing? Until recently, Google. Google has sidestepped the majority of this debate, but to review its actions you will see that the company first assailed content owners by seeking to scan all the books in creation. Then they decided to get into the device game with Android.

With these thoughts in mind, I went to meet with some people at the intersection of devices and content, Zinio.

Advantage Goes to the Content Providers

After a meeting this past week with Zinio, I’m leaning toward content providers winning the battle, but not after a scuffle—like the Hatfields and McCoys—between devices and content providers.

Zinio, in case you aren’t familiar with the company, is an electronic publishing company that works with 350 publishers and approximately 1,500 individual publications. Its device-independent service delivers a magazine-like experience primarily on PCs and other similar devices.

I spoke to Zinio about what they thought about the Kindle, the status of the newspaper and magazine industry and the relationship between publishers and advertisers. It wasn’t a surprise that they weren’t gaga over the black-and-white Kindle. For Zinio, it comes down to “art.” And while art comes in many forms, it’s still rendered most faithfully by the formats of the legacy content providers. And that content doesn’t fit neatly on a small 320-by-240 pixel screen, and it doesn’t work as well in black and white.

Doug Carlson, Managing Director of Zinio, is no Luddite—he fully believes and sees the coming gadget convergence. Not surprisingly, considering that he leads an e-content technology company, Carlson is sure that “in five years consumers are only going to carry two devices—an e-reader and a phone.” But he feels that device needs to be more content-friendly than today’s third-screen experience. “The high-fidelity experience is enhanced or maintained by our technology. Any device that doesn’t support high fidelity isn’t something that we can work with”.

I’m going out on a limb here: I think that in the end, content will win and we will return to an environment where the producers of original content will be again as valued as the manufacturers of the shiny objects that play that content.

As surely as I keep my books in bookshelves within easy reach, and my old electronic detritus inaccessibly tangled up in a dark closet, quality content will outlive the ephemera that we have temporarily used to enjoy it. And Google will probably outlive us all and will continue to straddle the divide between devices and content.

Minsiders columnist Dave Hendricks is EVP, strategy and planning, Datran Media.

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July 9 (Bloomberg) — Amazon.com Inc.’s Kindle, which accelerated the adoption of electronic books, may shrink publishers’ profit margins if the online retailer gets tougher about prices it pays for titles on the digital reader.

Publishers typically earn about $2.15 per digital book versus 26 cents for a print copy, according to Sanford C. Bernstein & Co. While publishers see digital books as the future, the market is dominated by the Kindle, leaving them vulnerable to Amazon.com’s bargaining power.

“We don’t want it to be where you can only get your book in one spot,” said Maja Thomas, senior vice president of digital media at New York-based Hachette Book Group, a unit of France’s Lagardere SCA. “We want what every publisher wants and what every author wants, which is ubiquity.”

Amazon.com, which cut the Kindle’s price yesterday, pays publishers $12 to $13 for Kindle editions of books on the New York Times best-seller list, and typically sells them for $9.99, said Paul Aiken, executive director of the Authors Guild, a New York-based group providing legal support to writers. Publishers are concerned that Amazon.com will start demanding lower prices from them so it can start making more money on digital books, he said.

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Dominance

“The industry as a whole is a bit nervous about the Kindle and the possibility that Amazon will really lock up the e-book market,” Aiken said. “The early path it’s taken here could really determine a lot about where the industry winds up and where people get their e-books in the future.”

As it stands, Amazon.com’s $9.99 e-book price is unsustainably low for the company and publishers, said Claudio Aspesi, a Sanford C. Bernstein analyst in London, in a June 19 note. Amazon.com will probably raise the price it charges Kindle users to $12.50 and pressure publishers to sell electronic books for less so it can make a profit, he said.

Amazon.com is the world’s biggest Internet retailer, with $4.89 billion in first-quarter sales. Drew Herdener, a spokesman at Seattle-based Amazon.com, declined to comment on the company’s relationship with publishers. He also declined to discuss the company’s pricing strategy and whether it sells some books at a loss.

So far, publishers have had few ways to distribute electronic books outside the Kindle. Sony Corp. has a digital reader, although it hasn’t managed to match the Kindle’s popularity, said Youssef Squali, an analyst at Jefferies & Co. in New York.

Amazon.com rose 74 cents to $78.10 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have gained 52 percent this year.

$2 Billion Forecast

The Kindle comes in two versions, one for $299 and a larger $489 model designed for newspapers and textbooks. The company cut the cheaper version’s price yesterday from $359. There are more than 300,000 books available on the device. It takes less than a minute to download individual titles, and a high- resolution black and white screen mimics the look of a printed book.

By 2012, Amazon.com may post more than $2 billion in annual revenue from the Kindle and content on it, said Sandeep Aggarwal, an analyst at Collins Stewart LLC in San Francisco. Amazon.com doesn’t disclose Kindle sales.

Sales of electronic titles in the book publishing industry more than doubled to $25.8 million in the first three months of 2009 from a year earlier, according to the Association of American Publishers in New York. Digital books still make up less than 2 percent of total U.S. book sales, which declined 7 percent in the first quarter, the association said.

New Competitors

Publishers are counting on an influx of competitors to reduce their reliance on the Kindle. Companies such as Plastic Logic Ltd. and FirstPaper, which is backed by Hearst Corp., are introducing digital readers. By the end of the year, Google Inc. plans to offer a program for publishers to sell e-books directly to consumers through the Web, said Gabriel Stricker, a spokesman for the Mountain View, California-based company.

CBS Corp.’s Simon & Schuster said last month that would work with a Web company called Scribd to sell digital books online.

Those efforts may give publishers more options and avoid the dilemma faced by the music industry with Apple Inc. The Cupertino, California-based maker of the iPod was able to set the industry standard for songs at 99 cents as iTunes grew into the dominant music-download service.

ITunes Equivalent

“Publishers and authors want to make sure there’s healthy competition so that Amazon and Kindle don’t become the equivalent of Apple and iTunes,” said Brian Murray, chief executive officer of HarperCollins, a unit of New York-based News Corp. “We want to make sure there are a number of successful companies selling e-books on devices.”

Newcomers in digital readers may be able to capitalize on tensions between Amazon.com and publishers, said Sarah Rotman Epps, an analyst at Cambridge, Massachusetts-based Forrester Research Inc. In February, Amazon.com disabled a Kindle read- aloud feature after the Authors Guild complained. The Guild also criticized the company in 2002 for promoting used books at the expense of new sales.

“Amazon has not historically had great relationships with publishers,” Epps said. “That’s a real emphasis for Amazon’s competitors. We’re still early in this game.”

Slow to Change

As much as publishers are concerned that their profit margins will be squeezed, their distress is partly of their own making, said Alex De Groote, an analyst at Panmure Gordon & Co., an investment bank in London. Publishers have been slow to adopt digital media and need to cut their costs, he said.

“The cost structure is top-heavy with people and top-heavy with print,” De Groote said. “If e-books can find a widespread audience, there is an opportunity for book publishers to take some of that cost out.”

Newspaper publishers also face tough negotiations with Amazon.com. The Dallas Morning News gets about 30 percent of the revenue from Kindle subscriptions, said James Moroney, CEO of the newspaper, which is published by Dallas-based Belo Corp. That revenue split with Amazon.com is “untenable,” he said.

More competitors in the digital-delivery market may force Amazon.com to give publishers better terms, said Rich Maggiotto, CEO of Zinio, a San Francisco-based company that distributes magazines and books digitally.

“Those that are coming in are being much more friendly to publishers,” Maggiotto said. “They are letting the publishers set the prices and aren’t taking as much of that margin.”

Gannett Co.’s USA Today, the biggest U.S. newspaper, is in talks with makers of electronic readers including Plastic Logic, publisher David Hunke said.

IRex Technologies BV, a Dutch company that sells digital readers primarily in Europe, is hoping to bring a future device to the U.S. would let newspaper and book publishers display advertisements — something they can’t do on the Kindle, said Kevin Hamilton, head of IRex’s U.S. operation.

To contact the reporters on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net; Greg Bensinger in New York at gbensinger1@bloomberg.net

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10,492. That is about how many different prerogatives I have heard about digital publishing’s future over the past 8 months. I started counting these on October 11, 2008. That seems to be the day when, for a number of reasons, the world realized that digital reading was not just an innovation any longer, but a reality.

Professionals from a number of industries: publishing, advertising, technology, research and services have all started pontificating about how digital publishing is going to change the way consumers will access, consume and value (aka. How much they will pay for) traditionally print media now available in a digital format.

It’s chaos!

But, it’s a good chaos. The entire ecosystem is bravely crossing into the next frontier: The Digital Divide. Over the next few months, anyone in the publishing industry will be able to say they were a part of a revolution. A revolution where digital stands up and takes permanent place in the hearts, minds and hands of consumers. This is a good and powerful revolution.

In it, publishers will be able to unleash creativity in designing publications with added depth and interactivity. New (profitable) business models already have, and will continue to be introduced, replacing older tired models. They will open up new opportunities to monetize brands like never before. And consumers will spend significantly more time with our publishing materials as it is easily integrated into their daily routine and lives.

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