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CD-ROMs turn rent-to-own

Wave Systems has come up with a technology that it thinks will help CD-ROM publishers improve declining sales.

Wave Systems (WAVX) is trying to take the gamble out of CD-ROMs for customers and publishers.

The company has devised a plan that will let PC makers bundle in CD-ROM titles that users can "rent-to-own" or pay for only when they use them instead of paying the whole amount upfront.

So far, the plan is just an idea. Wave is going to try and persuade PC manufacturers to build its WaveMeter chip into their home computers. The next step will be to convince CD-ROM and DVD-ROM publishers to throw their titles into the box so that users can test-drive them for less than the purchase price, said Steven Sprague, chief operating officer at Wave.

Wave plans to provide buyers with $5 of software time per computer as a way to get consumers to try the system. The actual form of payment could take several forms: the WaveMeter chip could handle transactions for pay-per-view, rent-to-own, subscriptions, or just buying the title outright.

CD-ROM publishers have had a hard time in recent months; sales of titles are down but the companies must still fight for shelf space to try and catch the consumer's eye. Wave thinks that its technology will provide a channel directly into the home and then let the merits of each title determine whether or not users pony up the full purchase price.

"Following the broad decline of retail sales in the CD-ROM arena this past year, we are following the successful example of the video game industry, where most titles are rented before they are owned," said Sprague in a statement.

Wave says the chip itself is cheap and manufacturing the CD-ROMs isn't a great expense for the publishers so the companies have nothing to lose. Sprague says the plan takes out extraneous risks and costs for everyone: software publishers get prime space in front of consumers and hardware manufacturers no longer have to pay software publishers in advance to bundle the titles.

The company says it's already attracted the interest of PC makers. "We're talking to three of the top six," PC makers, said Mark Marinovich, marketing communication manager for Wave. The company is also talking to a number of modem makers and board manufacturers. WaveMeter-powered computers should start to appear in 1998, according to Marinovich.

Wave has also developed technologies for making micro-payments, or purchases for amounts less than $10, over the Internet. But the company apparently needs to find a new market for its technology: the company reported $8.7 million in losses in 1996.