Toolmaker wants to be the standard for interactive publishing

Macromedia has set its sights on becoming the de facto standard toolmaker for publishers who are ready to author interactive media titles. Despite many corporate upheavals — two painful mergers, five CEOs and countless rumors of taking the company public — the San Francisco-based multimedia company appears to be close to achieving this goal.

The reasons are twofold. First, Macromedia has almost no competition since it now owns, develops and distributes the two most established interactive authoring programs for both the Macintosh and Windows-based PC platforms with Authorware Professional and Macromedia Director.

In addition, the company recently announced an incentive plan called the Publishers Program. It offers traditional publishing houses both training and price discounts on bundles of the company’s multimedia software, including Authorware Professional, a high-end cross-platform authoring tool that was designed from its inception to help create computer-based interactive learning programs (see related story, p. 3).

AN OFFER TRADITIONAL PUBLISHERS CAN’T REFUSE

The Publishers Program is an offer traditional publishing houses, in particular the textbook and education publishing houses, will find hard to refuse — not because it is so stellar a deal, but because it’s the only game in town for cross-platform electronic media development and delivery.

According to a developers’ survey created for Apple Computer in June of 1992 by GISTICS, Inc., a research firm, Macromedia owns 60 percent of the developer market, with QuickTime, HyperCard and Microsoft’s multimedia software developers’ toolkit following in second, third and fourth places, respectively.

IBM has been a major player in the PC-based interactive education market, but has proven itself to be unclear on the concept of developing commercial interactive learning titles. For example, it spent $5 million on Columbus: Encounter, Discovery and Beyond, a beautiful but nearly impossible-to-navigate title that costs $3,000 retail. But what public school system in the U.S. today can afford $3,000 for a single software title and then another $3,000-plus for the customized Ultimedia system required to run it?

The time is ripe. While predicted earnings and percentage rates are all over the map, market research universally predicts a lucrative future for publishers who enter the interactive education market now. Nelson Heller, publisher of an education technology report, projects that educational technology will grow twice as quickly as textbook sales in the K–12 market by 1994. Heller anticipates the K–12 technology market will increase from $1.4 billion in 1991 to $2.2 billion in 1994. The K–12 textbook market, on the other hand, is expected to increase only a small percentage — to $2.6 billion from $2 billion in 1991.

TEXTBOOK PUBLISHERS EDUCATED ON NEW MEDIA

Already some of the largest educational publishers in the world have signed up with the Publishers Program, agreeing to use Macromedia tools to produce interactive titles.

On paper, Macromedia has received commitments from Jostens Learning, Macmillan/McGraw-Hill, Houghton Mifflin, and a powerful newcomer to the publishing side of education — LifeTouch Learning, a fully owned subsidiary of LifeTouch, the Minneapolis-based company that is responsible for snapping almost every single elementary school student’s photograph in the United States.

Better the second time around. Like Jostens, which began as the company that made class rings (and now claims to own 70 percent of the interactive learning market), LifeTouch has a strong foothold in the U.S. educational infrastructure that might enable it to leap-frog its competition — traditional textbook publishers — and take a major piece of the market share.

The connection between Macromedia and LifeTouch Learning goes deeper than a partnership agreement. LifeTouch Learning is run by Michael Allen, the founder of Authorware and inventor of Authorware Professional, who started working for LifeTouch after the Authorware/MacroMind Paracomp merger, when it became clear that he had a different vision for the newly formed company’s direction. Bud Colligan, then president and CEO of Authorware, became president of Macromedia. Colligan is now CEO and president of Macromedia; he took over the post from Tim Mott, who is still chairman.

Despite their history, the two companies have made a long-term commitment to work together to build interactive learning applications using Authorware on the Macintosh. Ironically, Allen will now have to pay to use the software he developed.

One of LifeTouch Learning’s first customers is a nonprofit corporation called IMPAC, which is sponsored by the state of Arkansas. Both President Bill Clinton and Hillary Clinton sponsored IMPAC and its work when Clinton was governor of Arkansas. LifeTouch will develop courseware statewide for grades K–8, focusing on mathematics, language arts (writing), and reading curricula. Allen, who has his doctorate in educational psychology, retains the rights to distribute elsewhere the software curricula developed for IMPAC.

East Coast powerhouses. In addition to the deals Macromedia has announced publicly, the company is pulling out all the stops in an attempt to bring more of the large publishing houses into the fold. Macromedia recently held a one-day electronic publishing seminar in New York, in conjunction with Apple Computer and New York University’s Interactive Telecommunications Program, to woo major players in the education publishing market, including Addison Wesley, DC Heath, Harper Collins, W.H. Freeman, Prentice Hall and Simon & Schuster which fall under the Paramount Publishing umbrella.

More than 75 executives from East Coast publishing houses participated in the seminar. Kevin Howat, manager of publisher sales at Macromedia, claims the seminar was an “amazing success.” (Translation: Expect several more commitments from major education publishers in the next couple of months.) Macromedia plans to hold a similar conference for publishers on the West Coast within the next two months.

Making the transition. “The educational publishers know they are going to have to make the transition from the textbook to the disc,” says Howat. “And we are the only company that can offer them the breadth of tools and cross-platform capabilities as well as the ready-made talent capable of using the tools.”

Although the Publishers Program has primarily attracted textbook publishers, Macromedia is not limiting itself to the education market. The program has also caught the attention of International Data Group and Viacom. The Sumeria Group, a new IDG company founded to create an interactive CD-ROM magazine, has made a nonexclusive commitment to use Macromedia tools, as has Viacom New Media, the electronic publishing arm of cable giant Viacom. (For more on title development — both entertainment and educational — at Viacom New Media, see Vol. 2, No. 5, p. 12.)

MACROMEDIA MOVES INTO A CLASS BY ITSELF

The Publishers Program — if handled correctly by Macromedia — may be a win-win situation for everyone involved. The publishing houses, which are in the business of developing and delivering curricula, gain access to a new delivery medium that is expected to be quite profitable.

Also, they gain access to equipment that is temptingly priced — both software and hardware, if Apple’s presence at the publishing seminar counts for anything — plus much needed technical support and savvy producers who are comfortable developing electronic media with the new technologies.

Look for the label. In return Macromedia creates strategic alliances with some of the largest content owners in the world, which have committed to use — and in some cases standardize on — the company’s software. Macromedia also gains some free advertising: The company has implemented a policy whereby all commercial titles developed with Macromedia authoring tools will carry a “Made with Macromedia” logo, similar to the “Intel Inside” insignia found on many hardware boxes. Both Colligan and Howat emphasize that they are not trying to pass judgment on the quality of these commercial titles by use of the logo.

MACROMEDIA PUTS EXPANDED ROYALTY STRUCTURE ON HOLD

Until recently, Macromedia was also considering a much more controversial way to increase its revenues: it was seriously considering expanding its royalty obligations to include a charge of one percent of net revenue on commercial titles created with the next generation of Macromedia Director. (To date, there is a charge of one percent of net revenue on run-time versions of commercial title created with Authorware Professional. A run-time version allows the user to play, but not create, an application.)

Developers just say no. Market research and a survey of a number of the company’s Director-based commercial title developers has convinced Macromedia to hold off on the royalty expansion program. According to Colligan, perceived benefits to the developer community were not substantial enough, nor was the potential increase in revenue for Macromedia substantial enough, to merit the increased obligation. Colligan says he’ll reassess the market in a year to judge whether or not it can support such a royalty.

In the meantime Macromedia plans to create a special version of Director for commercial title developers, to include some of the high-end functionality they have been requesting to produce interactive media titles, including a compiled version of Director’s Lingo scripting language and file locking.

Can’t blame Macromedia for trying. We applaud Macromedia for its decision to wait. Although we cannot blame the company for trying to generate a new revenue stream — especially considering the potential profits for title developers that can sell their products to the masses, as opposed to those profits garnered by multimedia toolmakers — there is still a question as to whether or not developers believe a toolmaker has the right to collect royalties. After all, they say, Microsoft doesn’t collect royalties on every book written with Word.

Macromedia’s Colligan counters that the royalty would be as much for the use of the player engine as for the actual authoring, but developers say they often write their own engines.

Needless to say, the jury is still out on how exactly the royalty structure will shake out for toolmakers. But today, in any case, the commercial market for interactive media is still far too small to support a new royalty structure, and authoring software companies that try to implement new financial obligations in such an environment may find themselves wondering where their customers went. Developers have made it clear that they won’t hesitate to find other authoring systems, or to create customized tools for in-house development if need be.

GIVING DEVELOPERS A CHANCE TO MAKE IT REAL

Macromedia seems willing to accept the fact that small, innovative companies cannot afford the added burden, at least not in the short term. How much profit can be gained on one percent of 3,000 discs sold at $50? That’s typically how many copies of a commercial title, probably authored with Director, are sold today. Certainly $1,500 isn’t a dazzling revenue stream to Macromedia, but it’s like asking a struggling artist for the moon, especially since these artists may also be paying license fees for the content. Even 30,000 copies would only produce $15,000 — not much to Macromedia, but a gargantuan amount for a developer trying to break even on a $250,000 title production bill.

For a company that wants to become known as “the” interactive media toolmaker, as Bud Colligan likes to refer to it, the decision to wait on the royalty obligation is a very smart move. Even if it’s only a temporary respite, the company appears to be offering its customers a chance to help make this industry real.

Janice Maloney

MACROMEDIA PUBLISHERS PROGRAM IS A PACKAGE DEAL

Traditional publishers joining the Macromedia Publishers Program, which does not dictate that they use Macromedia products exclusively when creating electronic media, have two software bundles to choose from.

The first, Macromedia ProStudio for Interactive Learning, is for cross-platform development and delivery. It costs $9,995 (at retail, more than twice that amount) and includes Authorware Professional for the Macintosh, Authorware Professional for Windows, Macromedia Director, the Director Player for Windows, MacRecorder SoundSystem Pro, MacroModel, Three-D and two clip media collections for Macintosh and PC.

The second system, which is geared more toward producers developing interactive media for the consumer market, is called the Macromedia ProStudio for Multimedia Production. At $4,495, it includes Macromedia Director, the Director Player for Windows, MacRecorder SoundSystem Pro, MacroModel, 3D, SwivelMan, LifeForms and the two clip media collections.

Macromedia says it will offer training on the use of its products and on effective techniques for designing interactive media. The program tentatively includes two weeks of on-site training.

The company is also offering the MacroService Gold Priority Support Plan, which includes telephone technical support and a technical support team trained to answer questions specific to title development problems; 24-hour bulletin board/electronic mail support via AppleLink, America Online and CompuServe; and access to Macromedia’s “knowledge base” of commonly asked technical questions.

According to Bud Colligan, president and CEO of Macromedia, the company plans to expand the benefits for members of the Publishers Program during the next several months. It may include prereleased copies of development software for experimentation, access to a Macromedia user list for targeted mail campaigns and automatic entry into a title development awards contest held during the Macromedia User Conference.

Colligan says Macromedia will work with publishers to create customized systems, and site licenses are available for various configurations.

Janice Maloney