France Telecom's E-Reader Experiment

Its Read & Go device shows one way e-readers could become a distribution channel for newspapers and other frequently updated print media

This summer more than 100 volunteers took to France's crowded trains, cafés, and beaches with a serious assignment: to lug around and read enormous stacks of popular newspapers, magazines, and books. But the job wasn't as cumbersome as it sounds, because all the publications were compressed into a digital gizmo, called Read & Go, that is no larger than a hardback novel.

The trial of the prototype will wrap up this month, and by 2009, France Telecom (FTE) aims to start distributing the Read & Go in conjunction with a subscription-based news service of the same name. For a monthly charge similar to a mobile service plan, customers will receive an over-the-air stream of aggregated content from a wide assortment of information sources. Alongside the articles will be ads that help defray the cost of the service.

It's the latest development in the emerging product category known as "e-readers." For many years, overhyped digital books enjoyed scant success. But more recent entrants, including the popular Amazon (AMZN) Kindle and the Sony (SNE) Reader, are starting to catch on. Now, through the marriage of devices and service plans, e-readers could become an important distribution channel not just for static books but also for more frequently updated newspapers and other print media.

Sharing the Subscription Fees

That's a thrilling possibility for publishers slammed simultaneously by declining print ad revenues and rising costs for paper, printing, and postage. Unlike on the Web, where most news organizations have been forced to give away ad-supported content for free, they'll receive a cut of the subscription fees for Read & Go. (France Telecom won't disclose the terms yet, nor what it expects to charge for service or the device.)

The Read & Go device was developed by a Dutch company called iRex, which unveiled its own e-book, the iLiad, in 2007. Compared with earlier such devices, it has an easier-to-read screen that looks more like paper. The company also says it has optimized the gizmo to make downloading newspapers far simpler than on alternatives such as the Kindle or Sony Reader.

Read & Go will be available exclusively in France, providing users with up-to-date versions of major French publications, such as Le Monde and Le Figaro, through France Telecom's Orange cellular network. "These are for people who are strongly addicted to reading all newspapers," says Paul-François Fournier, France Telecom's senior vice-president for online and advertising. "It will amplify newspapers' audiences and their ad revenue."

Fournier stresses that France Telecom is not entering the news business. "We want to partner with the newspaper industry," he says. "We are not writing the articles or publishing content. We are just enlarging the means by which readers can access that content."

Plastic Logic's Flexible Screen

France Telecom and iRex aren't the only European companies making waves in e-readers. Britian's Plastic Logic grabbed headlines on Sept. 8 when it showed off a prototype product at DEMO, a showcase for hot startups attended by Silicon Valley's digerati. With a flexible screen the size of a sheet of paper—analysts say it's larger and easier to read than the Kindle—the Plastic Logic device is being touted as the perfect tool for reading newspapers on the go.

The biggest breakthrough in the Plastic Logic gadget is its "plastic electronics" technology, which lets it be extremely thin and lightweight—and the size of an 8.5 x 11-in sheet of paper. Plastic Logic takes advantage of display technology from a company in Cambridge, Mass., called E Ink, whose "electronic paper" is so thin and cheap that small screens using the technology were pasted onto the front cover of Esquire magazine's 75th anniversary issue in October. (The screen showed a short video loop saying "The 21st Century Begins Now.") Plastic Logic will target business professionals with its device and hope to begin distribution in the U.S. in the second quarter of 2009, with a later release in Europe. No price has been announced.

Analysts say they believe that European newspapers will embrace e-reader technology more rapidly than their American counterparts—in part because they're in better financial shape. "European publishers are very confident and have a more long-term viewpoint on business development," says Stig Nordqvist, the director of Germany's IFRA Digital Research, a firm that studies the publishing industry. Nordqvist also says European publishers have been less reluctant to adapt to Web-driven business model than have Americans, which is one reason U.S. newspapers are in so much financial trouble.

High Price of E-Readers

But while e-reader champions say they could do for print what MP3 players did for digital music, critics urge caution. The prices of e-readers, they note, still remain relatively high. It may require subsidized business models—such as France Telecom likely will offer with Read & Go—to ease consumer resistance.

What's more, in a classic chicken-or-egg dilemma, service providers don't want to strike deals with publishers and subsidize e-readers until they're assured of consumer demand, yet consumers won't sign up until the selection of news is broad and the readers are cheap.

And, of course, subscription-based models will always be challenged by the wealth of free news available on the Web. "Newspapers still think their brands are so powerful that people will pay for it, and that's just not the case," says Richard Shim, an analyst at market researcher IDC. Maybe not on the Web. But will the convenience of a wireless e-reader be enough to entice customers to pony up for news? Stay tuned.

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