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New system creates software on demand for CompUSA customers

Customers are still trying to figure out what it is. But the whirring machine inside the front door of the CompUSA store in Emeryville, Calif., may transform the way software is sold.

The SoftwareToGo system is the first in a major U.S. retail chain to create software titles on demand, said its manufacturer and CompUSA. The electronics seller has installed the machines in stores in Seattle, Dallas and the San Francisco Bay area, with plans to roll it out nationwide starting next quarter.

For now, CompUSA and software publishers see the machine as a way to increase the number of titles they sell, without taking up valuable space on shelves. But in the future, its advocates say, systems like SoftwareToGo might reduce inventory problems, keep popular items available for purchase even when they're gone from shelves and cut down on software theft _ major problems for stores.

As he gave a recent demonstration of the system, Mitchell Rawlings, general manager of the Emeryville CompUSA, was interrupted by an employee bearing an empty box of Microsoft Office Professional software. Someone had sliced the top with a razor, removed the discs and walked out.

"That's $500 right there. That murders us," he said, then swept his hand toward the SoftwareToGo machine. "Man, I hope it all goes this way."

CompUSA's new system is part of the technology-fueled movement toward delivery of consumer products only after customers have ordered them. Improved data storage and the increasingly digital nature of content are allowing companies to expand their inventory, keep goods in stock and prevent titles with limited demand from disappearing.

One example is music. Even as they continue to sell compact discs, bricks-and-mortar music stores recently have installed kiosks that sell subscriptions to online music services, which let music fans download songs at home and burn CDs. Napster 2.0, a music-download service by Roxio Inc., sells prepaid gift cards in Target Stores and even gas station minimarts.

Books also are moving in this direction. Barnes & Noble, the nation's largest bookseller, is quietly but rapidly increasingly its Print on Demand program, in which the company waits for a customer to order a book before it prints and ships it. The book looks the same to customers.

Brewster Kahle, an entrepreneur and philanthropist in San Francisco, has periodically driven his Internet Bookmobile around the country for the past few years, distributing copies of Alice's Adventures in Wonderland and other books in the public domain. He downloads the books through a mobile connection, prints and binds them in his van, then hands them out to children.

Protocall Technologies Inc., a closely held company in Commack, N.Y., is taking a similar approach for commercial software in stores. Protocall makes the SoftwareToGo system and has spent the past four years trying to persuade software publishers such as Microsoft Corp. to distribute their titles through it.

Customers in the Emeryville CompUSA can find two SoftwareToGo kiosks, one on each end of the two aisles of shelves filled with software boxes. The kiosks work like an ATM: Customers can use a touchscreen to browse through the roughly 1,000 titles by name, category or publisher.

The offerings are still limited. Microsoft is the partner with the biggest name, but has made only five titles available: four versions of the Scholastic's The Magic School Bus game and Encarta Encyclopedia 2004. Atari Inc., Rand McNally & Co. and Roxio Inc. have software on the system. Adobe Systems Inc., Intuit Inc. and others do not, although Protocall executives say they are in discussions with top publishers.

Customers choose a software title, print an order ticket and pay at the register. But the real innovation isn't the kiosk, it's the machine by the front entrance that fulfills the orders.

Inside sit three 250-gigabyte drives that hold master copies of the software. A pair of CD drives burn the software onto a CD, then press the title, logo and product key number onto the CD's top. A Hewlett-Packard Co. color laser printer produces the packaging, which a CompUSA employee assembles. The whole process takes about five minutes. Software publishers and CompUSA officials don't anticipate that the most popular titles will be sold exclusively this way.

David Berett, Microsoft's group manager for retail business development, pointed out that assembling the software produced by Protocall's machine is easier than assembling a hamburger at a fast food restaurant. But Microsoft's newest operating system won't get cold sitting on shelves _ keeping inventory makes more sense than spending five minutes burning a copy onto CDs for each customer who wants one.

"Ultimately our interest would be to have all the titles we sell at retail in kiosks," Berett said. "It's not realistic to think we'll be in that mode for quite some time."

Meanwhile, the system can dramatically expand the number of software titles sold, making retail stores more competitive with online stores. Retail stores are no longer limited to what they can fit on shelves.

"It's an inexpensive way to expand the offering of software that we make available to customers," said Dewey Thoes, a senior buyer in CompUSA's Dallas headquarters.

That's the approach Barnes & Noble takes. When a customer orders a book online or in a store, Barnes & Noble checks its inventory. If the book is out of stock but the publisher has given permission for on-demand printing, Barnes & Noble will have the book created, usually within 48 hours.

"The worst thing you can say to a customer is, "No, I don't have it,' " said Steve Riggio, chief executive of Barnes & Noble.

He estimates that Barnes & Noble will sell $10-million worth of books printed on demand this year, up 40 percent from last year. The program has been most successful with smaller publishers, such as university presses, which print fewer copies of their books than major publishers.

"It's pointing to the time when a book will never go out of print again," he said.