New Kid Software on the Block : Personal-Computer Giant Packard Bell Tries to Crash the Crowded CD-ROM Market

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Packard Bell marketing Vice President Glen Uslan pulled up a screen featuring a cozy British countryside.

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Birds sang.

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Packard Bell, a leader in sales and marketing of lower-priced personal computers, is trying to get into the software business. The idea, executives say, is to bring out a line of similarly lower-priced titles for children, to be marketed as impulse items in discount chains like WalMart and Target.

“Our real goal is [to create] the same type of product that Packard Bell has done with hardware--a quality, affordable product,” Uslan said.

Operating out of the Westlake Village headquarters of the home-computer giant, Active Imagination is distributing six new CD-ROM storybooks, dubbed the Kidstory series.

The company hopes to have as many as 15 titles by the end of the year. Another Packard Bell unit is bundling the six Kidstory titles into multimedia upgrade kits.

The new products mark the company’s initial effort to snatch a piece of a burgeoning market. Last year, CD-ROM sales hit $648 million, almost triple the total for 1993, according to the Software Publishers Assn.

But industry analysts say the goal will be difficult to achieve. Competition is so stiff that even well-known software makers find themselves forced to lower prices and bundle software with computers and upgrade kits.

Packard Bell has no track record when it comes to software, and the company’s plans for advertising the new titles appear to be limited. Officials refuse to say how much they plan to spend on the project, but Uslan said he is running his division with just six people.

The plan, according to Uslan, is to license titles, not produce them. And instead of advertising, the company hopes to take advantage of its relationship with discount retail and computer stores to obtain shelf space and sell through name recognition and packaging. Two of the titles are to be included with Packard Bell PCs by mid-June.

Eventually, the firm hopes to break into the software market for adults, said Karim Kano, vice president of strategy and business development. Already, it is trying to market two utility programs it developed for its personal computers.

The venture and the strategy are vintage Packard Bell, say analysts who watch the closely held company. Stephen Bruce, vice president of worldwide personal systems research for International Data Corp. in Massachusetts, said Packard Bell had $3 billion in sales last year but was looking to software as a way to grow more profitable.

“I think they are trying to keep it in typical Packard Bell style--kind of lean and mean,” he said. “I think they decided they, as well as anyone else, could get into the [software] distribution business. It’s kind of a coattail to their PC business.”

The move can be seen as part of the trend among multimedia hardware makers to bundle encyclopedias, educational programs and games to help differentiate their computers from the competition, says Kathy Klotz, a multimedia analyst with Dataquest Inc. in San Jose.

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“What drives the sale of a multimedia computer is education,” she said. “You have to have some kind of educational reference material . . . and games. If you don’t have that type of content, you are not competitive.”

The lure of the education market is easy to see. Parents spent $106 million last year on instructional CD-ROMs. Entertainment programs aimed at children racked up another $169 million.

Some software makers are blending both markets in an elusively defined category known as “edutainment,” the software that tries to make reading, multiplication tables and spelling bees fun.

Gary Griffith, assistant manager of the Egghead Software outlet in Tarzana, said children’s software is so popular that “it’s hopping off the wall.”

Children are growing up with computers and feel comfortable with them, he said. Parents, though they may not be as adept with the machines as their children, are encouraging the trend. Getting a multimedia computer is seen as a way to give children a head start in school.

Still, some software experts aren’t sure if Packard Bell’s reputation in hardware will translate over into software.

Companies with unproven track records are having a tough time getting shelf space. And once the product is there, its shelf life can be as short as three months. Profit margins can be as low as $1 per disk.

Even attaining space in stores that sell Packard Bell hardware products might not ensure success for Active Imagination, said George Meier, publisher of a Wall Street newsletter called Software Analyst.

Software “is a different business than hardware,” Meier said. “It’s analogous to the stereo business and the music CD business. Record companies don’t make stereo equipment, and stereo companies don’t make records.”

Active Imagination will compete in a market dominated by well-known titles like “Just Grandma and Me,” based on a story by Mercer Mayer and published by Living Books, a joint venture between Broderbund Software and Random House. That company, as well as other major players like the Learning Co., Davidson & Associates and Edmark Corp., have the advantage of reputation, particularly among teachers who often recommend titles to parents.

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By comparison, Active Imagination’s titles include decidedly odd, little-known Australian children’s stories, like “The Friends of Emily Culpepper,” the tale of an old woman who shrinks her friends and keeps them in jars.

Gillian Newson, senior associate editor of NewMedia magazine, said Packard Bell’s name won’t “conjure up entertainment software.”

CD-ROMs, she said, “cost between $20 and $50. Nobody wants to spend $50 and think the kid isn’t going to play with it again and again.”

The Packard Bell titles have received tepid reviews. Newson wrote that the best thing about one new title, “Milly Fitzwilly’s Mouse-catcher,” is its colorful packaging.

“One scene shows a mouse eating from a jar marked ‘Deadly Jar’ and happily squealing ‘Poison!’ ” Newson said. “What kind of message is that for kids?”

Warren Buckleitner, editor of the influential Children’s Software Revue based in Ypsilanti, Mich., said his reviewers tested the product on children, who gave it a rating of 3 out of 5 at best.

“We were moderately impressed,” he said. “But we wouldn’t want to give it an endorsement.”

But Buckleitner said the company contacted him after his newsletter’s less-than-glowing review and asked for feedback.

“Good companies bounce back,” Buckleitner said. “They respond to criticism and come up with a version 2.0.”