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The Apple of the U.S. Prison System

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JPay, a 200-employee Miami business, anticipates solid growth by
selling specialized MP3 players, music, and other media devices
to prison inmates

By Nick Leiber
     Aug. 14 (Bloomberg BusinessWeek) -- The United States
incarcerates more of its population than any other country. From
1990 to 2010, the number of people serving time in state and
federal prisons more than doubled and is now nearly 2.3 million,
according to a recent report (PDF) by the Pew Center on the
States. Earlier this year, the New Yorker’s arresting article,
“The Caging of America,” chronicled reasons for the accelerating
incarceration rate.
     The surge has been good for a constellation of corrections
contractors, including JPay, which handles money transfers,
e-mail communications, and video visitations for more than 1.4
million inmates in hundreds of prisons across about 35 states. So
good that the decade-old business last year expanded into selling
inmates its own line of “prison-proof” MP3 players—what it dubs
the JP3. “We’re looking for products that an inmate would want to
buy and a corrections facility would accept,” says founder and
Chief Executive Officer Ryan Shapiro, 35. “Music was a no-brainer
because inmates don’t have enough music and they all love music.”
     Shapiro is aiming to make JPay, a 200-employee Miami
business that became profitable in 2006, the Apple of the U.S.
penal system. To understand why he thinks Apple or another tech
behemoth can’t easily snuff him out, here’s a quick review of
prison rules: Corrections facilities generally forbid devices
that can be turned into weapons, be used to communicate freely
with the outside, or conceal contraband. Hand a violent prisoner
an iPad and the risks become fairly clear.
     Shapiro says JPay’s player, which retails for around $40 at
kiosks the company installs in common areas inside prisons, is
virtually indestructible. Inmates use it to browse a library of
more than 10 million songs, “just like on iTunes,” and download
them for $1.99 a pop. The three most popular artists are Usher,
Tre Songz, and Kenny Chesney. “We take outside applications,
redevelop them for prisons specifically, and then deploy them,”
Shapiro explains. “The prison doesn’t pay for any of [our
services]; it’s the end user who pays.”
     JPay didn’t pioneer its new line of business. Keefe Group, a
St. Louis-based supplier of food and personal-care products to
prison commissaries, launched its own music download service for
prisoners in 2009. While the 37-year-old company didn’t respond
to interview requests, a press release posted on the company’s
website says it sold more than 1 million downloads in just over a
year. On its own website, a rival correctional facilities
supplier, Union Supply Group, headquartered in Rancho Dominguez,
Calif., says it started selling digital music to offenders in
2003 and has available more than 5 million tracks “approved” by
correctional partners. Shapiro won’t say what JPay has sold or
how much it scores in annual revenue but asserts that the company
is “way in front of [Keefe] when it comes to money transfer or
the media business.”
     Shapiro, who holds a bachelor’s degree in economics from the
University of Colorado, Boulder, learned about the inconveniences
of transferring money to a prisoner’s account when a friend’s
mother was sentenced for embezzling. He says inmates “understand
you have to charge in order to be able provide a service … Look
at our Facebookpage. Look at how many times someone says: ‘I love
JPay.’”
     Next up for the business: a mini tablet it plans to start
selling by yearend called the JP4. “It’s got an e-mail
application, music, e-books—it’s got anything you can imagine,”
says Shapiro. “Think about education, think about games; it’s
endless where we could go. We think it’s as big, if not bigger,
than the money-transfer business.”

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