May 12 (Bloomberg) -- Newspaper publishers say Amazon.com Inc.’s new Kindle electronic reader may help a business plagued by plunging ad revenue and shrinking circulation. Seventeen years ago, the news industry tried to help itself.

The Kindle DX, introduced last week, can display newspaper pages and hold 3,500 books. New York Times Co. and Washington Post Co. have agreed to distribute their newspapers on it, Amazon.com said. In 1992, Knight Ridder Inc. set employees to work at a lab in Boulder, Colorado, to create its own portable newspaper-reading device to boost readership and revenue.

“There were people talking even then about the death of newspapers and there would be some electronic medium that would replace ink on paper,” Roger Fidler, who headed the Knight Ridder laboratory, said in an interview last week.

Fidler and his colleagues spent about three years trying to create an electronic tablet that could download newspapers and magazines. With the death of James Batten, Knight Ridder’s chairman at the time, the project fizzled and the 10-person lab was shut down, according to Fidler.

McClatchy Co. bought Knight Ridder, the publisher of the Miami Herald, in 2006. Fidler, 66, is now the program director for digital publishing at the Donald Reynolds Journalism Institute at the University of Missouri in Columbia.

Peter Tira, a McClatchy spokesman in Sacramento, California, had no comment.

The new $489 Kindle DX has a 9.7-inch screen, displays PDF documents and can be used in landscape and portrait modes. Amazon.com didn’t take any inspiration from Knight Ridder in developing the product, Drew Herdener, a spokesman for the Seattle-based online retailer, said in an e-mail.

Sharing Revenue

Amazon.com will keep 70 percent of the revenue from Kindle- based subscriptions, with the rest going to the newspaper, James Moroney, publisher of the Dallas Morning News, told a U.S. Senate committee on May 6. Amazon.com doesn’t discuss the terms of its deals, said Cinthia Portugal, a spokeswoman. She confirmed that the Kindle DX won’t initially carry ads.

Newspaper publishers are cutting jobs, combining sections and halting print editions to cope with plummeting ad revenue and a 7.1 percent industry circulation decline for the six months through March. The Christian Science Monitor and Seattle Post-Intelligencer this year switched entirely to Web versions.

In a 1994 promotional video, Knight Ridder said the tablet readers would be “part of our daily lives by the turn of the century,” with screen clarity similar to the printed page, color displays and sound.

“It may be difficult to conceptualize the idea of digital paper, but in fact we believe that’s what’s going to happen,” Fidler said on the video. Unlike the Knight Ridder concept, the Kindle DX downloads articles wirelessly and doesn’t have color.

Kiosk Downloads

Fidler said in the interview that he and his team had hoped to produce a device that could download articles or entire publications from kiosks at hotels, airports and malls. Publishers would share the advertising and circulation revenue.

“There are many people who believe that newspapers are dinosaurs and that they’re going to become the roadkill on the information superhighway in the not-too-distant future,” Fidler said on the video. “We believe exactly the opposite.”

From 1992 to 1995, Fidler and his team worked on the tablet and attracted some interest from newspaper and magazine publishers in joining a distribution system. Hardware tripped them up: Screens then were too heavy or bulky for most consumers and required too much power, Fidler recalled.

“When the lab was shut down, I think a lot of people took that to mean newspapers weren’t interested in the concept,” he said. “Technology companies and publishers focused their attention on the Web.”

New Ways

In the current slump, newspaper publishers are seeking new ways to engage readers, said Rusty Coats, vice president of interactive for E.W. Scripps Co., which is testing the Kindle DX at two of its newspapers. Before the device is broadly used, Amazon.com will have to find a way for it to display non-text ads, he said.

“So far, the Kindle is a reader, it is a wonderful reader, it is not a sustainable advertising model,” said Coats.

Gannett Co., which stopped home delivery of its Detroit Free Press four days a week, said it will distribute the newspaper on another e-reader being developed by Plastic Logic Ltd. Hearst Corp., which owns the Houston Chronicle, also invested in a company developing a reader.

“I am thrilled this is finally happening,” said Fidler. “It’s vindication for all the years when people said this was a crazy idea and it wouldn’t work.”

To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

Last Updated: May 12, 2009 00:01 EDT