Paramount Joins the Educational Software Rush : Technology: Venture with Torrance-based Davidson follows wave of mergers seeking piece of burgeoning market.
Eyeing what it believes will be a $1-billion market for educational multimedia software, Paramount Publishing said Tuesday that it has formed a joint venture with Torrance-based Davidson & Associates, the largest remaining independent, publicly owned publisher of educational software.
The scope of the deal--which includes an initial $50-million investment from Paramount--is one of the broadest multimedia alliances in the fast-growing education arena thus far. The joint venture, which aims to produce electronic books for consumers, schools and businesses, follows a wave of multimedia mergers in recent months.
For Paramount, the world’s largest publisher of educational books, the five-year venture with Davidson offers the prospect of leveraging the vast library it already owns into a new medium. For Davidson, best known for its ubiquitous Math Blaster program, it means fast expansion and the opportunity to develop expertise in the lucrative school curriculum market.
Davidson also moved into the entertainment software field recently by acquiring Chaos Studios Inc., a start-up Costa Mesa computer game developer.
The firm, which went public last year, plans to build an addition to its Torrance facility, complete with a one-way mirrored area to observe parents and children using the software. Bob Davidson, who runs the company with his wife, Jan, a former teacher who founded Davidson, said they plan to hire about 200 people over the next year.
The alliance illustrates how old-line publishers such as Paramount--which has been hurriedly converting its books into computerized format but does not expect to finish the job until 1996--are turning to younger, smaller companies such as Davidson to help them make the transition to the digital age.
Electronic books are published on CD-ROMs, which hold 400 times the data of a typical computer floppy disk and can store pictures, sound and video as well as text. As the price of computer equipment needed to play CD-ROMs plummeted, the number of titles exploded to more than 8,100 worldwide in 1993, according to InfoTech, a Woodstock, Vt., market research firm.
Paramount said schools are increasingly demanding multimedia accessories to traditional textbooks. And educational software aimed at children and teen-agers, who often are more at home interacting with a computer than their parents, has proven to be a particularly hot segment of the CD-ROM market. High-growth forecasts estimate sales of home software alone will reach $300 million this year, doubling to $600 million in 1996--all of which has spawned a rash of mergers and alliances in recent months.
“Paramount is recognizing that there are very few horses to ride in the educational software area,” said Charles Finnie, an analyst with investment banker Volpe Welty & Co. in San Francisco. “It wants to get its hooks into this very attractive market.”
Earlier this month, Pearson, parent company of publisher Addison-Wesley, bought Software Toolworks, a Novato, Calif.-based educational multimedia publisher. In February, Electronic Arts agreed to purchase Broderbund, the leading publisher of children’s software, which has a separate deal to publish electronic children’s books with Random House.
Paramount itself bought software developer Computer Curriculum Corp. in 1990, and its parent company, Paramount Communications Inc., has a minority stake in La Crescenta-based multimedia start-up Knowledge Adventure. Paramount was recently purchased by Viacom Inc.
Paramount and Davidson will share the investment and revenue in a set of about 25 titles to be developed for the home and business markets, drawn from Paramount’s library of more than 300,000 titles. Plans include interactive versions of the children’s book “Chicka Chicka Boom Boom” and the bestseller “Beating the Street” by investment guru Peter Lynch. They will be sold under a new joint Simon & Schuster-Davidson name in computer and bookstores. Simon & Schuster is a unit of Paramount.
Under a separate deal, Davidson will develop curriculum-based software for Paramount for schools. These CD-ROM titles will be sold with textbooks published by Paramount’s Prentice Hall, Silver Burdett Ginn, Computer Curriculum, Supplemental and ESL (English as a second language) units.
Paramount stock ended off 87.5 cents at $38.375 on the New York Stock Exchange. Davidson rose $1 to $23.50 on Nasdaq. Viacom was off $1.125 at $26.625 on the American Stock Exchange.
Times staff writer James S. Granelli in Costa Mesa contributed to this report.
