News : Bigger Kindle e-reader may not be a newspaper fix

By Alexandria Sage

SAN FRANCISCO (Reuters) - Amazon.com Inc's Kindle electronic reader was supposed to revolutionize publishing by freeing people from having to carry books around. Now the Web retailer may super-size it for newspaper readers.

Amazon plans to launch this week a bigger version of its Kindle, which may also house textbooks, analysts and media report. The New York Times said the new device could be unveiled on Wednesday and its parent would be involved.

But a larger-format e-reader may not be a quick fix for a struggling newspaper business devastated by crumbling ad revenue and declining readership. Nor would it guarantee a big boost to Amazon's bottom line anytime soon, analysts say.

Questions about whether such a device will host ads and how Amazon shares revenue, also pose key concerns, they say.

But a larger-format device could at least ease Amazon's entry into digital text books, which some have said represents the best guarantee of a steady revenue stream.

On Monday, the Wall Street Journal reported that the upcoming Kindle will be doled out to students at six colleges -- including Princeton -- starting in the fall.

It will also feature a more fully functional Web browser, the Journal cited people briefed on the matter as saying.

Spokesmen for Amazon and the Times declined to comment.

Amazon has credited the Kindle with helping prop up sales and its bottom line -- although it has never disclosed that data nor the device's profitability. The company's shares are up nearly 60 percent this year, far outpacing the Nasdaq.

Amazon and Sony Corp are the only two major manufacturers of e-readers, but a host of companies from Polymer Vision in the Netherlands to Plastic Logic in the United States are working on devices geared to newspapers and other formats in which a larger screen is a benefit.

Pearson Plc's Financial Times and Gannett Co Inc are working with Mountain View, California-based Plastic Logic on a newspaper-oriented reading device expected to launch early next year.

MURDOCH ALSO IN

News Corp Chief Executive Rupert Murdoch said in April his company, which owns The Wall Street Journal, New York Post, Times of London and many other papers, is also investing in a reading device with a larger screen for newspapers.

Analysts wonder if the device may usher in a new model for newspapers struggling to slash costs and stay afloat.

The recently-launched Kindle 2, the updated version of the original Kindle that made its debut in 2007, already allows users to read newspapers and magazines, as well as books and blogs.

"What we're anticipating is that Amazon will release a device with a bigger screen also," said Forrester Research analyst Sarah Rotman Epps. "But just because it has a bigger screen doesn't mean it will be a revolutionary model for newspapers."

"Just because it has a bigger screen does not mean they will primarily be used for newspapers and magazine readers overnight," said Epps, adding that book readers, rather than newspaper fans, drive e-reader sales.

And if the device costs more than the $359 Kindle, consumers might balk at paying more than they would for a netbook, said Sanford Bernstein analyst Jeffrey Lindsay.

"Should I pay $359 or more for it without half the functionality (of a netbook)? It's a real dilemma," he said.

While the Kindle has its fans, others believe the paper- book sized gadget is hard to navigate, Lindsay said.

"Clearly if news is an important mechanism for this ... they're going to want a bigger format," he said. "Probably the 7-inch device is too small for convenient navigation."

But consumers, whose love of hand-held gadgets has spurred the success of the Blackberry from Research in Motion Ltd and Apple Inc's iPod and iPhone, might not know what to do with a device the size of a small newspaper.

"Where would it fit into your bag?" Lindsay asked.

Analysts will look to see how Amazon jump-starts new-media business models for newspapers, which face an uncertain future as the ad revenue that once sustained them drifts online.

"They don't have as much control as they'd like to," Epps said of newspaper and magazine publishers. "Amazon is keeping the majority of the revenue and publishers can't sell ads through the Kindle.

"The only question is whether this larger device will also support an ad model. If it does, then it becomes a more appealing distribution model for publishers."

If it does not, any uptick would be modest, Epps added.

Academia might be a good fit, because it could replace heavy, expensive textbooks, Epps said. If Amazon could align with text book publishers and drop the price of books delivered digitally, it "very quickly justifies the cost of the device," she said.

In February, Scott Devitt, then an analyst at Stifel Nicolaus, told Reuters he considered the text book market "an eye-opening opportunity."

(Additional reporting by Robert MacMillan; Editing by Edwin Chan and Andre Grenon)