Card-Operated Newsracks p. 65

By: George Garneau Cash cards are a textbook case of technology seeking a market;
they're popular in Europe, but haven't caught on in the U.S. sp.

DESPITE SOME SUCCESS in Europe, card-operated newspaper vending machines have gotten a chilly reception stateside.
Newsracks that accept cash cards are being tested in small numbers at U.S. papers, but results have been largely disappointing.
For the time being, consumer habits simply haven't kept pace with technology. Until cash cards reach critical mass ? meaning when they become universally sold and accepted ? soda machines, snack machines, telephones and laundromats simply have no incentive to install expensive card reading devices.
But based on the growing use of credit and debit cards in grocery stores and gas stations, people involved in newspaper single-copy sales predict that sooner or later cash cards for small purchases, like credit cards in shopping malls, will become another step toward the futuristic vision of a cashless economy.
Cards come in several varieties, those with a magnetic strips, like standard credit cards, and "smart cards," whose cash is stored in a silicon chip and deducted when the user buys something from a machine.
For two years, the Philadelphia Inquirer has been testing a newsrack that accepts cards in the offices of Core States Bank in Philadelphia but "with very little success," said Nancy Karahuta, city single-copy sales manager.
The machine sells just five papers a day. Problems include: The bank has changed the card, and the newspaper has trouble getting into the building to service the machine.
"Maybe it's before its time," Karahuta said. "Folks here just aren't used to it."
While there is no pressing motive for dabbling in smart cards, newspapers are trying to figure out early on if and how they might apply in the future, when, as is widely believed, cash cards will catch on in the New World as they have in the Old.
Card-operated newsracks are seen as offering a convenience to regular single-copy readers in upscale apartment and office complexes. Cards might be a handy alternative for people who reach into their pockets for $2 in change for a Sunday paper but come up short.
Dave Nichols, national director of transportation and distribution for Gannett Co.'s USA Today, said several Gannett papers are testing smart card technology in newsracks.
"We think in the future there's a possibility of it, based on what we see in supermarkets and service stations," he said. "We're trying to see what the acceptance is."
Nichols said a movement has started toward developing a standardized universal card, but it could be 10 years before it becomes come widely used.
Without exception, early entrants say, the market has greeted card-operated newsracks with a big yawn.
Bellatrix Systems Inc., a Bend, Ore.-based vendor of newsrack data systems, five years ago created a prototype newsrack that accepted standard magnetic-strip credit cards, but failed to sell a single unit.
"We expected this technology to move quicker than it has," said Steve Morris, Bellatrix sales vice president.
Due to lack of interest, he said, "We are on the sidelines waiting for the market to catch up." He said the company was looking for a major newspaper to start a pilot program.
Unfortunately, with newspapers under severe cost pressure from soaring newsprint prices, single-copy sales efforts often end up "at the bottom of the food chain and are the last to get resources," he said.
Certainly, high prices put a damper on card-operated newsracks. Vending boxes equipped with card readers cost over $1,000, compared with $250 for a basic model with a mechanical coin mechanism.
However, card-operated newsracks have had considerably more success in Europe, where debit cards are far more widely accepted and where readers pay more because advertisers pay less.
Through 1990, Sonntags-Blick, Ringier's Swiss Sunday paper, installed 4,500 mobile, chip-card operated vending machines, which sold about one-third of the paper's 360,000 circulation.
In one promotion, the newspaper mailed to 20,000 weekday subscribers
a chip card offering three Sunday papers for free. Within a month, 5,000 people had signed up to buy chip-cards good for six months or a year, according to the machine's manufacturer, Journomat AG of Zurich.
In another test of 850 machines in eastern Switzerland, sales increased 15%, Journomat said.
The machines are solar powered, with battery backup, and push out one copy of the paper at a time.
Morris of Bellatrix portrayed Europe as being about 10 years ahead of the New World in terms of acceptance of cash cards.
"That's the problem," he said. "The public is not used to this stuff."
Another U.S. paper experimenting with smart cards is the St. Petersburg Times, which has tested one card-operated rack in a complex of more than 100 apartments inhabited mostly by unmarried people, who are more likely to buy single copies than to subscribe.
"We just want to try out the technology," said single-copy manager Matt Heck. He reported no operational problems ? "the technology hasn't missed a beat" ? after a year of testing but few sales, despite discounts offering a $50 smart card for $25. In spite of aggressive promotion, only six cards were sold, as readers chose to pay full price from coin-operated machines.
The few who bought the cards "loved" the system, however, Heck said, pledging to "rethink" the project and perhaps try it out in a large condominium or office complex.
Heck warned that other factors could figure in to the ho-hum response in St. Petersburg. For one, the Times still sells for just 25? daily, $1 on Sunday, because of cutthroat competition, so buyers face no cash crunch. For another, consumers might balk at paying in advance for a card they can only use in one newsrack.
The larger problem, then, is a chicken and egg question. Why should a vendor invest in the expensive card readers when there is no universally accepted card? And why would you buy a card if you can't use it in any soda machine, snack machine or telephone booth.
"Once the general public carries a card that will work, then vendors will put the readers in their machines," said David Kaspar, sales vice president of Kaspar Wire Works Inc., the newsrack manufacturer in Shiner, Texas. "Until that happens, I don't think this technology is really going to blossom."
He added, however, "I think someday everybody's going to have a card in their pocket."
Kaspar said his company has sold 25 to 30 newsracks with card reading mechanisms, all for tests. But he hoped tentative plans would come to fruition for local banks to sell cash cards for the 1996 Summer Olympics in Atlanta and promote the idea to U.S. consumers and businesses. The Atlanta Journal-Constitution is considering participating but has made no decisions.
For newspapers, another prohibitive factor is cost. A basic newsrack with an electronic mechanism costs about $375. With a smart card reader, prices jump to $1,000, or $1,200 with both.
Manufacturers attribute the high costs to limited demand and expects prices to drop once readers go into larger production.
Then there are technical issues such as batteries, how long they last and how much they cost.
?(This updated newspaper vending machine, from Automated News Vending Systems, San Antonio, Texas, is available with an optional device that allows it to accept payment from cash cards, each embedded with a computer chip.) [Photo & Caption]