Once a Booming Market, Educational Software for the PC Takes a Nose Dive
SAN FRANCISCO, Aug. 21 - Edward Vazquez Jr., 6, has numerous educational tools at his disposal. He learns math from flashcards and the alphabet from a popular electronic gadget called the LeapPad. But when it comes to instruction, the family's personal computer sits dormant.
"He has a lot of toys for learning - not the computer," said his father, Edward Vazquez, 28, a waiter in San Francisco. One reason, Mr. Vazquez said, is "you don't see a lot of that software."
That statement would have been unthinkable a few years ago. In 2000, sales of educational software for home computers reached $498 million, and it was conventional wisdom among investors and educators that learning programs for PC's would be a booming growth market.
Yet in less than five years, that entire market has come undone. By 2004, sales of educational software - a category that includes programs teaching math, reading and other subjects as well as reference works like encyclopedias - had plummeted to $152 million, according to the NPD Group, a market research concern.
"Nobody would have thought those were the golden days," Warren Buckleitner, editor of Children's Technology Review, said of the late 1990's. "Now we're looking back and we're saying, 'Wow, what happened?' "
What happened was an explosion of new, often free technologies competing to entertain and teach children. Young children have long been a primary audience for computer learning games. But with free games and learning sites now available all over the Internet, parents are finding that they do not need to buy software that can teach the A B C's. And the spread of broadband connections has made playing online games far easier.
The preschool and elementary school set is also moving toward portable gadgets like the LeapPad made by LeapFrog Enterprises, and other electronic toys from makers like Fisher-Price and VTech. Older students, industry analysts said, are less likely to buy educational software when reference material and encyclopedias are free online.
And there is the pass-along effect. Simple programs for toddlers and young children are often handed down among brothers and sisters because the titles and curriculums do not change much over the years.
Other industry analysts and executives said that parents' frustration at installing new programs and the nearly universal availability of computers in classrooms have made using home PC's for learning less appealing.
Danisha Floyd, 22, said her 5-year-old son, Edgar, uses a LeapPad and does not have a computer at home. "He uses computers at school," she said.
Alan Zack, product director for Encore Software, a Los Angeles company that makes and distributes educational programs, said, "Kids come home and they don't want to get on the computer."
Basically, said Chris Swenson, an education software analyst for NPD, "the PC has lost its luster as the center for learning at an early age."
The result in business terms has been a downward spiral. Only 222 educational programs for PC's sold more than 10,000 copies in 2004, down from 447 in 2001, according to NPD. As sales began to decrease, retailers devoted less and less shelf space to these titles, making recovery for the industry more difficult.
To regain their footing, some companies are starting to create programs that can connect to the Internet and cater to parents' interest in measuring their children's academic progress.
One reason for hope is that parents are spending more on educational tools and services than ever. Kirsten Edwards, an education software industry analyst with ThinkEquity Partners, a research firm, noted that overall spending on teaching tools and toys had increased. Spending on tutors, she said, rose to $4 billion in 2004, from $3.4 billion a year earlier.
Yet educational software is getting an ever smaller share of that consumer dollar. It is among the lowest-priced of any software category; in 2004 the average price for an educational program was $18, compared with $23 for the average computer game, according to NPD.
The fate of the Learning Company, once one of the biggest names in the educational software business - with well-known titles like Reader Rabbit and Carmen Sandiego - underscores the industry's rapid decline.
In 1998, the company was acquired by Mattel for $3.8 billion, an indication of the expectations for the industry's growth. Quickly, though, the market faltered. In 2001, the company's educational titles were acquired for $40 million by Riverdeep, an Irish education software company. Today, Riverdeep, which has an office in San Francisco, continues to sell Learning Company brands. But it is trying to remake them to cater to new consumer interests.
Last week, it released repackaged versions of Reader Rabbit and Carmen Sandiego, among other titles, that include in the boxes an old-fashioned tool: flashcards intended to complement what students learn on the computer.
Jessica Lindl, vice president for marketing at Riverdeep, said the flashcards are lead-ins to more extensive changes in the software next year. Future versions, she said, will help assess a student's needs and give parents feedback on the child's progress. In future versions of the reading program Reader Rabbit, for example, children who do not master a level will get repeated lessons.
People used to buy educational technology for technology's sake, Ms. Lindl said. "What needs to happen now is there needs to be returns, or results, for the purchase."
One company, Topics Entertainment, of Renton, Wash., is aiming at parents who want to increase student achievement. Programs in its Success line are packaged in clean white boxes without cute cartoon characters, though the programs, which teach math, reading and other classroom subjects, are meant for students in grade school.
Even getting the programs into the stores can be a big challenge. Max Cowsert, director of product development for Topics Entertainment, said that retailers like Best Buy had reduced the shelf space they allot to educational software, and some video game retailers had eliminated the category altogether. "It's not going to continue to slide at this rate," Mr. Cowsert said. "It has to stop declining, or we'll disappear."
Educational software makers in the consumer market are not alone in their struggles. Those making software for schools have suffered too, executives and analysts said, from cutbacks in school budgets. Overall spending on software by K-12 schools was $2.3 billion in 2004, up 2 percent from a year earlier but down from $3.4 billion in 2001, according to ThinkEquity Partners.
Nonetheless, some say that children's software can make a comeback. Mr. Buckleitner, an occasional contributor to the Circuits section of The New York Times, says there is still a future for teaching tools for the PC, especially as high-speed Internet access permits the delivery of richer content.
As for the drop in sales, he said, "it's like a forest fire has burned through," making the scorched earth ready for future growth.
