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Should Your Company Make a CD-ROM?

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PUBLISHED OCTOBER 1996

by Dianne Jacob, Publishing Strategist


The CD-ROM market has many similarities to book publishing. It’s a huge, multi-million dollar business. It’s dominated by large corporations. There’s lots of money to be made if you get good distribution and have the right formula. These days, the right product is almost always a game, an encyclopedia, or a useful product for kids. However, the right formula for a best-seller, like with books, remains elusive.

If you want to make a CD-ROM, you will need to demonstrate that it’s the best way to present the information. For example, a top-selling product I
helped produce, 3D Landscape, lets you plant your virtual garden and then view it from all angles and even walk through it in 3D. It also lets you choose flowers, shrubs, and trees by selecting your own conditions and preferences-such as color, shade or sun, and high or low maintenance. There are plenty of books on gardening, but no print book allows readers to see the garden they are imagining come to life.

But first you’ll need to understand how planning, making, and selling a CD-ROM works. First, let’s begin by getting the investment issue out of the way. A CD-ROM can cost several hundred thousand dollars to make, and most companies can’t afford to go it alone. Content providers usually collaborate with development houses (often comprised of engineers and graphic designers). The key is finding a good match of skills and an agreement that will share both risk and reward. To do this, you’ll need an excellent proposal that can coherently discuss your idea and a thorough business plan for it. Many specifications not only describe the product in detail, but also discuss the marketing issues, competition, schedule, budget, roll out, and distribution.

Now on to the process. Let’s say you have a reference book about cats and you’d like to make it into a CD-ROM. To sell, your CD-ROM must contain more than text. It needs a combination of photos, animation, video, sound, and illustration. Let’s say you have text for all cat references, and perhaps half the photos. Your first issue is whether you own the text and photos, the audio and video.

Two kinds of technical people are critical to making your product. You’ll need a graphic designer to create the overall look and feel of your product. You’ll also need an engineer who can create a searchable database and write the software that makes the product run. Users will be able to simply type in a name, like Siamese, and then will go directly to the relevant screen.

Together the engineer and the designer will work on the graphical user interface of your product. The designer may hire animators, photo researchers, illustrators, and others whose expertise helps to make the CD attractive and fun to use. A technical writer will create an online help
system to assist users when they can’t figure out how to use the software. A team of testers will find bugs that will need correction. A project manager will get the team working together to meet deadlines and budgets.

In short, you’re not making a book, you’re making a software product. It requires a completely different set of skills and expertise. There’s lots that you can do yourself, if you’re willing to learn. However you will definitely need outside help.

On to box design. You get someone to design the package. Next you need a manufacturer of CD-ROMS who will package the product. Then you find a distributor who will sell it into software stores, and you’re almost done, assuming you can get the attention of both an experienced distributor and the top software stores. Now for an important question: Will you make a profit? The answer, for most independent CD-ROM makers, is maybe, after a couple of years.

The CD-ROM market has been undergoing a vast transition in the last two years. Once the darlings of venture capitalists and large publishing companies, CD-ROM developers have been left at the altar for the allure of the Internet and the World Wide Web. Publishing on the Web eliminates
packaging and, best of all, distribution. In addition, insufficient shelf space and slow sales of multimedia PCs have added to the slow success of CD-ROMs.

A few years ago, every major publisher established a new media department and made extravagant deals with software developers to turn their content into CD-ROMs. I participated in a partnership between the Hearst Corporation and Books That Work, a Silicon Valley start-up where I worked as editor-in-chief.

We made a product called the Popular Mechanics Car Guide. Most of the information in it came from outside sources because the magazine simply couldn’t provide the depth of information necessary for an encyclopedic topic.

Today the New Media department at Hearst is gone. And just recently, another large publisher of CD-ROMS with 17 titles, mostly based on best-selling books such as Men Are From Mars, Women Are From Venus, shut down too.

HarperCollins president Jack McKeown told The Wall St. Journal that “We have come to realize that distribution, not editorial quality, is the driver in this market.” The big publishers are finding that the CD market is new, confusing, expensive, and slow to make money. Most of them have now turned to the Internet. Ironically, the Internet is experiencing the same problems and it will take a few years to sort them out.

How many people will buy your CD-ROM? There’s good news and bad news about the installed base of PCs. The good news is that almost all new PCs, including many laptops, are sold with built-in CD-ROM drives as standard equipment. Growth of the US market for home PCs will slow this year, however, and sales could even begin shrinking by 1998 as the market matures, says market researcher Dataquest. Compare this to the explosive 42% growth rate in 1994 and nearly 22% in 1995. Dataquest expects around 33% of US homes to have a PC by the end of the year. Currently only 16% of all home PCs are multimedia-meaning they contain a CD-ROM drive, speakers, and the ability to play video and animations.

Why do companies make CD-ROMs? The best thing about them is that they hold tons of information that you can access in new, more efficient ways. For example, let’s say you want to upgrade to the new Microsoft Office word processing software. Got a couple of hours to insert and remove 34 floppy disks? With a CD-ROM drive, you put in one disk and hit the install button. There’s not a lot more to it. The CD also takes up less space on your shelf and is less susceptible to damage than floppies.

If you’ve got a great idea for a hot game, you might be on the right track. Game software posted the largest dollar increase in software sales last year, jumping almost to $359.1 million from $274.4, with a 31% increase in unit sales, according to PC Data. The reference category (products like encyclopedias, cookbooks, and travel) showed the smallest category increase in dollar sales, rising 12.7% to $36.4 million in 1995.

Here’s what’s selling after the game category. This spring, according toMultimedia Merchandising Magazine, the top reference-type CDs were Microsoft’s Encarta, an encyclopedia; Compton’s Interactive Encyclopedia; the 1996 Grollier Multimedia Encyclopedia; Rand McNally TripMaker; Cinemania, a movie encyclopedia . . . you get the idea.

In the home category, sometimes called Special Interest or Productivity, the top CD-ROMs this spring were Hallmark Connections Card Studio, Family Tree Maker Delux, Mavis Beacon Teaches Typing, and Your Personal Trainer Act. In other words, these products help the customer do something practical or fun-learn to type, make a family tree, or work out.

In the education (children’s) category, tops were Math Blaster, the Lion Kind Activity Center, the Pocahontas Animated Storybook, and the Winnie the Pooh Animated Storybook. These products are bought by parents to help their kids learn by having fun.

In conclusion, it’s possible to make a CD-ROM that produces a profit, and even one that wins awards. It can be done if you have a great proposal for a product, you communicate it effectively to the right players, and you find some talented people to help you make it and sell it.


Dianne Jacob is a publishing strategist, working for interactive publishers and print publishers on content and strategic issues. She is also the former editor-in-chief of Books That Work, a CD-ROM software company based in Palo Alto, California. Jacob can be reached at 510/655-9085 or on the Internet atdiannej@aol.com.

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