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Date: Thursday, May 17, 2001 3:46 PM
Subject: New Economy: Behind Bars, a Market for Goods

Subj: NYTimes.com Article: New Economy: Behind Bars, a Market for Goods 
Date: 05/14/2001 1:38:01 PM Eastern Daylight Time 

New Economy: Behind Bars, a Market for Goods


ORE than 1.3 million inmates were under the jurisdiction of state and Federal prison authorities in 1999, according to the Justice Department. During the 12- month period ended June 30, 1999, the Federal prison population rose 9.9 percent, the largest yearly gain ever reported. The incarceration rate has tripled since 1980.

To some, these figures are a national embarrassment. To others, they represent a marketing opportunity. Particularly in consumer electronics.

Take headphones. They are a ubiquitous feature of prison life, given the potential for conflict over noise and music preferences. Indeed, headphones are required by some corrections departments and are popular items in commissaries and mail-order catalogs that sell directly to inmates. 

In the last 10 years, the Koss Corporation, a maker of headphones, has become a leading supplier of "listening accessories" to the prison market. Koss learned, however, that not just any headphone is a good fit behind bars. The product has to be customized: the ear cups and housing must be transparent or "clear," so drugs cannot be stashed inside. The headband must be plastic, with no metal springs, so a knife cannot be fashioned from it. The cord has to be a bit weaker than usual so it can't be used as a garrote, for permanently silencing a guard or cellmate.

Koss also developed simpler packaging and adjusted its warranty policy for this market. "Our lifetime warranty was really being abused by the customers in prison," said John Koss Jr., vice president for sales at the Milwaukee-based company. "On the advice of our distributors, we have now reduced that warranty on our clear products to 90 days."

Outside prison, Koss is second only to Sony in retail stereo headphones, with a market share of 28 percent, according to the
research firm NPD Intelect, and had overall sales of $34.8 million last year. It entered the prison market by chance when it was asked to bid on a contract for "ear bud" personal listening devices at one prison. Now, according to Mr. Koss, its line of inmate headphones represents more than $1 million in sales annually. 

Although Koss is not the only company that aims at the large and growing incarcerated population, it is one of the few companies willing to talk about how it markets to the segment. "This business is very quiet, very tight-lipped," Mr. Koss said. "We sell through a group of closely held companies that specialize in getting merchandise into the prison stores. This is a lucrative business both for the manufacturers and the distributors so there's a reluctance to talk about it for fear of attracting competition."

One of Koss's distributors confirmed that assessment.

"We don't like exposure," said Tom Thomas, president of Union Supply. The company, based in Rancho Dominguez, Calif., distributes items to prison commissaries and also offers a catalog of more than 5,000 items for direct sale. "This is really a closed market," Mr. Thomas said. "Once you get in and get a contract, it's hard to dislodge someone." 

There is another reason for secrecy: politics. Much of the public and most lawmakers dislike the idea that prisons are stocked with consumer electronics items, or that prisoners have access to presumed amenities of any kind. In response to such sentiment, Congress is considering legislation that would prohibit use of federal money for things like cable television, martial arts training and weight-lifting equipment in penitentiaries. Many corrections officials disagree, since offering or withholding such items or activities can be useful in managing the prison population.

Statistics on commissary sales of nonfood items are hard to come by. The Federal Bureau of Prisons, the Justice Department and the American Correctional Association were unable to supply numbers. But one thing is undisputed: It is a severely fragmented market.  

"Prison shops are run differently state by state, even prison by prison," said Michael Dallaire, the executive director of
Correctional Health Care Consultants in Forestdale, Mass. Mr Dallaire monitors the prison market closely and assists people
entering the health care segment. "Many times, what's sold depends on the level of security and is at the warden's discretion," he added.

One commonality is a movement toward clear products. "Clear is growing nationwide; it's a contraband issue," Mr. Thomas explained. "Clear TV's, hot pots, shavers any product that is allowed into an inmate's personal possession all the way down to clear trash cans."

Zenith Electronics has manufactured a TV set with a clear polystyrene cabinet for four years. "Everyone in this area knows
the story about the guard uniform that got smuggled into a prison in a TV," said Nancy Langendorf, national sales manager for
Zenith's government and special markets group. "As a result, some states only allow clear TV's now." Other requirements include, of course, an earphone jack, as well as a list of no-nos: antenna, flip- down door and remote (it could be turned into a bomb detonator). 

Zenith's "prison TV" (as it is called within the company, now owned by LG Electronics of South Korea) is oddly attractive, with  its minimalist translucent casing, and its appeal has extended beyond the prison population. The unit has caught the eye of some retailers and proved popular with children. "As a result, we've developed some nonprison models with translucent colors, similar to the iMac," Ms. Langendorf said, referring to Apple Computer's translucent machines. 

There is an almost endless demand for new items, because inmates possess an uncanny ability to alter products in unexpected ways and rarely for the greater good. "It's amazing what they can do to even simple items, electronic ones in particular," says David Blackburn, executive assistant to the warden at the Federal Correctional Facility in Lompoc, Calif. "That's the key when any new item is made available: Can this be altered and become a threat to security?"

Certainly, mail-order distributors to the market have to take extra precautions. "We don't hire just anyone off the street, in
case they have relatives in prison," Mr. Thomas said. "And at the end of every day, we make sure that everyone involved in packing and shipping hands in their Exacto blades. We can't have something like that accidentally shipped behind bars."

Still, although the prison market is difficult to crack, "considering the demographics," he said, "it's worth it."


Copyright 2001 The New York Times Company