TV GUIDE– Warns of Declining Readership

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TV Guide Inc. said it probably will reduce the number of readers guaranteed to advertisers of its namesake magazine as circulation is expected to continue to decline steadily.

The weekly magazine of TV program listings could lower its so-called rate base by eliminating free copies given out in places such as doctors’ waiting rooms, President Peter Boylan said. He didn’t say when such a reduction might occur. TV Guide most recently lowered its rate base to about 11 million.

The move would save money by cutting down on printing expenses, said Boylan, who is also the company’s chief operating officer. A lower rate base would help protect the magazine from having to give advertisers free ad space or money in exchange for not meeting circulation projections. TV Guide’s circulation is expected to decline by about 10 percent a year, Boylan told investors at a Banc of America Securities conference in New York.

“Clearly it’s a mature franchise,” he said. Boylan stressed that the company, which owns Internet and interactive-TV units as well as publishing, is experienced in running businesses that are no longer growing. He also said the company intends to stay in magazine publishing, which generates large amounts of cash flow, or earnings before interest, taxes, depreciation and amortization.

The publication’s content also is expected to change as more U.S. television systems move to digital technology from traditional analog. The switch means many more channels that the magazine would have to list.

“You can’t print all those channels without destroying your business model,” Boylan said.

TV Guide magazine, which started in 1953, will become more editorial-driven and less focused on TV listings in the future, he said.

Through Pasadena-based Gemstar International Group Ltd., TV Guide is expanding from print publishing to the business of electronic magazines, books and newspapers.

Gemstar, which is buying TV Guide, also bought Menlo Park, Calif.-based SoftBook Press in January.

Gemstar, through a partnership with Thomson Multimedia, will introduce new SoftBook models to sell during the Christmas season. The product is about the size of a notebook and lets a viewer download and read books, newspapers and magazines on its screen.

There will be two models for sale in stores such as Circuit City and Best Buy. The larger one will sell for about $199 and will be preloaded with classics such as Shakespeare’s works, as well as trial offers for various magazines and newspapers, Boylan said.

The smaller model will cost about $100. Both products weigh roughly a pound, Boylan said.

Boylan said he expects devices such as these to eventually replace handheld products such as Palm Inc.’s Palm devices.

The SoftBook and similar products ultimately will include advertising, electronic-commerce capability, e-mail, calendars and other items, he said.

“Personally, I think Palm will go away,” he said.

Boylan also said Gemstar’s acquisition of TV Guide is on track to be completed by the end of the second quarter.

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