CD-ROM encyclopedias outselling print versions

In 1994, families with multimedia personal computers are expected to snap up 3 million CD-ROM encyclopedias. But only 500,000 to 700,000 print encyclopedias will be sold, perhaps half the number of five years ago.

Families are entranced with getting 20 to 25 volumes of text on a single disk, physically identical to a music CD, for as little as $99, and parents are taking notice of their children's increasing interest in learning from a computer rather than a book.


The disparity in sales, likely to grow in future years, is a huge problem for the encyclopedia industry. Indeed, this could be the test case for how digital technology will transform a range of other traditional media such as movie and television studios, newspapers, mass-market book publishers, cable television and magazines.

"This is merely the opening salvo," said Roger McNamee, a technology investor with Integral Capital Partners in Menlo Park, Calif. "The changes are so rapid in electronic technology that you don't have time to reinvent yourself."


The biggest problem for established media companies, according to Mr. McNamee, is not recognizing new technology and its impact but overhauling their internal structure to reflect // the changes.

"I am convinced every new generation of technology requires new business models to exploit," he said.

The two leading publishers of print encyclopedias -- World Book hTC Inc. and Encyclopaedia Britannica Inc., both based in Chicago -- are caught in exactly that quandary.

World Book and Britannica sell print sets of their encyclopedias by direct sales, employing hundreds of sales representatives nationwide who visit potential buyers in their homes. There's an old saying in the business -- "encyclopedias are never bought, they're sold" -- reflecting the difficulty in persuading people to buy the World Book at $679 or Britannica starting at $1,800.

The three leading CD-ROM encyclopedias -- Compton's Interactive, Microsoft Encarta and the New Grolier Multimedia -- cost just $99 after an unexpected price war last year, although buyers must have already invested $1,500 to $2,500 in a multimedia PC.

"We'd destroy the price of the print set" if CD-ROMs were sold in stores at that price, said Jack Dailey, group president of World Book Educational Product, the company's sales subsidiary. "We think World Book is the Cadillac of encyclopedias. We're not going to sell it like a Yugo."

World Book and Britannica don't really have a choice. If they switched to selling $99 CD-ROMs, their direct sales forces would walk away. In the short term, at least, both companies would lose millions of dollars.

"They're almost in the position railroads were in when air travel came along," said Craig Bartholomew, general manager for home reference products at Microsoft Corp. in Redmond, Wash.


According to industry sources, sales of both World Book and Britannica have fallen by half during the last five years. But it's not as clear how much of the decline is due to the arrival of CD-ROM.

Britannica blames the drop on general weakness in the economy. World Book attributes its falloff to management problems, fixed by a recent change in the sales force.

The two companies are also addressing the impact of electronic competition by giving their sales force a new weapon this summer: CD-ROM versions of their encyclopedias as a bonus for buyers of the print set.

World Book's "New Illustrated Information Finder" will be offered as a $92 option for print-set purchasers; Britannica is planning to start shipping a CD-ROM next month that will be part of a $2,499 package. Although the World Book CD-ROM can be purchased separately for $395 and the Britannica CD-ROM for $1,595, neither company is pushing the disks alone.

World Book tells parents that getting children to read is the nation's biggest education challenge, a challenge better met with print encyclopedias than CD-ROMs.

CD-ROM publishers make exactly the opposite argument, insisting that print encyclopedias rarely leave the living room shelf.