In an attempt to maintain its dominance over the booming market for multimedia encyclopedias, Microsoft Corp. is acquiring the rights to use content from Collier’s, one of the nation’s most respected print encyclopedias, in its Encarta CD-ROM, industry sources said.
Officials from both Microsoft and Collier’s declined to comment, but sources close to the companies said it is a “done deal.”
Microsoft’s CD-ROM encyclopedia is important to the Redmond, Wash.-based software company because it was the company’s first major multimedia success and has become the centerpiece of its efforts to boost software sales to schools.
Microsoft’s move, designed to shore up eroding market share for its top-ranked multimedia encyclopedia, underscores the extent to which the electronic media have revolutionized a business once dominated by door-to-door salesmen selling the heavy tomes as the road to upward mobility.
Although sales of general-interest multimedia encyclopedias jumped 32% last year to nearly $60 million, industry profits have been decimated by cutthroat price competition from Britannica, World Book and Collier’s.
The crowded market has eroded sales of individual units of Encarta software. Microsoft’s market share based on unit sales of multimedia encyclopedias fell to 27.5% last year from 44.8% the year before, according to PC Data, a Reston, Va.-based market research firm.
And while Encarta leads in overall sales, it still lags Britannica and Encyclopedia Americana (sold as Grolier’s) in prestige.
With the Collier’s deal, Microsoft would have access to masses of information that analysts say could add both style and depth to Encarta.
“Collier’s is in a league with Britannica and Americana,” says Ken Kister, a Tampa, Fla.-based encyclopedia analyst and author of Kister’s Best Encyclopedias, an industry review. “They call them the ABC of the encyclopedia industry.”
Microsoft has been widely praised for effectively using video and graphics to make Encarta more accessible to students. But the company’s original decision about five years ago to use text from Funk & Wagnalls, largely regarded as a second-rate encyclopedia, has remained a weakness.
“We are always trying to make the product deeper and richer,” said Ruthann Lorentzen, director of marketing for Microsoft’s Interactive Media Group. Lorentzen declined to confirm or deny any Microsoft deal with Collier’s but suggested that the industry is headed for a shakeout. “The business isn’t big enough to sustain everybody,” she said.
Collier’s is owned by New York-based Atlas Editions, a part of Italy’s Instituto Geografica de Agostini group of companies. Atlas Editions recently changed its name from Collier’s Newfield.
Britannica first tiptoed into the market in 1994 with a $1,200 CD-ROM, but cut the price to $500 last year. It only recently became more serious about reaching a mass audience, releasing an improved version of its CD-ROM in October priced at $125. It now can be purchased for as little as $80 (including a $20 rebate).
With advice from Harvard Business School professor Jeffrey Rayport, Britannica trimmed costs, eliminated a high-priced sales force and positioned itself to profit from selling larger volumes of low-cost products.
“This has revolutionized the marketing and selling of encyclopedias,” Kister said. “Britannica costs $1,500 for 32 volumes. Now you can get it for less than $100 [on two CD-ROMs]. Sales of print encyclopedias are way, way, way, way down.”
Other companies are also entering the race to tackle an audience hungry for the multimedia products. World Book allied itself with IBM Corp. and released an electronic version of the World Book encyclopedia in January 1997.
“It’s the primary name people have grown up with,” says Jim Reynolds, brand manager for IBM’s World Book Multimedia Encyclopedia.
Collier’s, which was formerly owned by Maxwell McMillan, has also slashed costs in a bid to survive. Last fall, the company released its first multimedia encyclopedia in a partnership with Sierra On-Line.
Sierra has been among the most aggressive recent entrants to the market. Industry sources say its products have sold for as little as $10 (after a $50 rebate). It is unclear how a deal with Microsoft would affect Sierra’s product.
Although Microsoft would have to invest a significant amount of money to adapt Collier’s content for Encarta, the result should be a far more authoritative encyclopedia, analysts say. Although Microsoft has been steadily boosting Encarta’s content--increasing the number of words in its latest Deluxe edition to 14 million from 11 million last year--the number count is still far short of Britannica’s 44 million words.
Britannica also has the prestige of having such renowned figures as Albert Einstein as the authors of some of its entries.
Microsoft insists the multimedia content in Encarta makes it a more useful educational tool for school-age children. Still, Encarta would stand to become more authoritative from Collier’s breadth--it contains 17 million words--and depth, analysts say.
Depth of content could be particularly important as publishers move to make their encyclopedias available over the Internet. Britannica, for example, expects to receive a substantial proportion of its new revenue from monthly subscription fees charged for access to its Web site.
Times staff writer Leslie Helm can be reached via e-mail at firstname.lastname@example.org