Although NewspaperDirect says it is in the final round of negotiations with several investors, remaining viable could be a struggle. The challenges of this niche have already claimed one casualty: a US company called PressPoint, the first to offer such a service, collapsed last year, when a major backer cut off funds and revenues did not cover the gap.
"These models have always run into trouble," said Vadim Zlotnikov, senior technology analyst at the investment firm Sanford Bernstein & Co, in New York. "It is very tough to find a balance between subscription fees and advertising. If they charge companies too much to distribute the stuff or if they charge too much per newspaper, it's a problem."
NewspaperDirect says it keeps costs low, in part because the Russian programmers who developed the software worked cheaply. And it says its technology allows it to easily keep track of every paper its clients print -- a key point, since each participating newspaper receives a royalty of up to US$0.25 for each copy printed.
Other industry observers said the project might work, because it uses the Internet to reduce costs. Getting the newspaper from publisher to local distributor typically makes up about 40 percent of the final price.
"It is a smart business," said Omar Wasow, an Internet analyst and executive director of BlackPlanet.com, a Web services company. "It focuses on a niche that plays to the strengths of the Internet by using technologies that radically lower the cost of distributing information."
And the service has its fans. Last week, members of the multinational hockey team, the Detroit Red Wings, staying at a Marriott Hotel in Detroit, ordered copies of Canadian, Czech, Russian and Swedish newspapers. When Elton John performed in St. Petersburg, Russia, earlier this year, he ordered three different newspapers in his hotel every morning: The International Herald Tribune, the New York Post and USA Today.
"What we bring to the market is choice," said Miljenko Horvat, chief executive of NewspaperDirect. "If you're Korean and you don't speak English, Kansas City is a very lonely place."
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