Doug Carlston - Software People. An Insider’s Look at the Personal Computer Software Industry

Atari’s spin-off, Activision, went to the opposite extreme and forgot that it was putting out something which was a commodity as well as an intellectual property. Electronic Arts, in my opinion, went to the extreme of promoting its image above its substance (although the substance has improved dramatically from the first year). Activision is in decline, but Electronic Arts is very much alive, so the verdict on the success of this metaphor is still not in.

Another metaphor for software publishing grew out of the educational software market. Venture capitalists were entering the software industry in a big way at the same time market researchers started predicting phenomenal growth in the area of educational software. This led to the idea of the software publisher as a marketing company, an idea that is similar to the metaphor of the record company, except that it glorifies the company instead of the programmer. The company name is the focus of attention, not the individual products.

Driven less by promotion of its individual titles than by promotion of its overall reputation, a marketing company creates a public awareness of its position in the market, an image that makes people want to buy the company’s product almost regardless of what it is. The goal is to persuade the consumers to buy the newest software “flavor” of their favorite “brand” on a regular basis. Spinnaker is probably the best example of a purely market-driven company. It even uses different names for its different software lines—like General Motors’ Chevrolet and Cadillac divisions—for different market segments.

Most of the significant new companies in 1982 and 1983— that is, those, like Spinnaker, that appeared to have lots of money behind them—weren’t especially interested in games. Their mandate was educational software, especially for young children. The futurists had said that educational software would be the area of greatest growth for the next few years (in an industry where phenomenal rates of growth had become commonplace), and it seemed auspicious that there were so few companies taking advantage of this particular market.

A billion-dollar pie was therefore waiting to be cut up. Today’s start-ups in the educational software field were bound to be tomorrow’s success stories. Let MicroPro and MicroSoft and VisiCorp carve up the business software market. Broderbund, Sierra On-Line, Sirius, and other companies that were founded in the hobbyist days were welcome to the entertainment software market. The fortunes of the near future were going to be made in educational programs.

Furthermore, educational software was respectable. The only thing respectable about video games, for example, had been the amounts of money Pong and Pac-Man had magnetically attracted from the pockets of teenagers around the world. But that respectability was based on nonsense—inscrutable worlds of alien invaders and munching cartoon characters that made a game hacker’s paradise. No, educational software would be a rational market, one in which serious programmers could implement designs formulated by professional educators and could bring out products that could be sold by truly professional marketers.

Why, just look at Spinnaker—everybody’s idea of what a professional, marketing-oriented, home software company ought to look like. It was carefully planned and well capitalized, and it had a rapidly growing professional management. Founders William Bowman and C. David Seuss had seen the vacuum in the educational software field and moved to fill it. Their ambitious plans had called for a rate of growth that was regarded as phenomenal even by the somewhat jaded standards of the software industry. They confidently predicted that they would grow from $700,000 in revenues in 1982 to $10 million in 1983 to $74 million in 1984.

By the end of 1983, it was clear that Spinnaker was not just meeting these sales projections but actually exceeding them! Not only did 1983 revenues top $11 million, but the company showed a (small) profit to boot. With revenue growth like that, Spinnaker might make the Fortune 500 by 1987!

A commonplace notion in the industry says that sales are eventually going to be driven more by effective marketing than by outstanding products. It stands to reason, for as products proliferate, technological gaps will narrow and the market will become increasingly confusing. In such an environment the companies that should prosper are those that most effectively convey their message to the consumer.

And Spinnaker’s marketing was superb. Its product packaging and media advertising were highly stylized and drove home the company name. It was hard to miss the Spinnaker name in magazines. According to an article in the August 13, 1984, issue of Infoworld, Spinnaker spent $1.5 million on advertising in 1983, more than five times what Broderbund spent. In fact, it was advertising in magazines we never even dreamed of advertising in—like Good Housekeeping and Better Homes and Gardens. The company name was everywhere.

Some of Spinnaker’s marketing strategies appeared to be borrowed from much larger corporations. In order to increase its share of shelf space and give the consumers a sense of a greater degree of choice, Spinnaker adopted a “branding” strategy whereby the company marketed its products under six different brand names, each of which defined a particular kind of educational software. “We will get much more shelf space with six brands,” Bill Larson, director of business development, declared. “Just like General Motors aims each of its cars at a different target market, from Chevy to Cadillac, so will we.”

This strategy seems to be generating high sales figures, but it is still too early to tell whether Larson’s pronouncement amounted to a prophetic declaration or famous last words. High sales are profitable only if they can offset expenses—and this marketing strategy is expensive. It remains to be seen whether or not the market-driven company will end up as the dominant metaphor in the software publishing industry, but there is little doubt that marketing considerations will remain an important part of every software publisher’s strategy for success.

I like to think that Brøderbund incorporates the best features of all the various models that have so far defined the software industry, but if there is any single metaphor that is closest to our self-image, it is that of a book publisher. We like to work with independent authors who nevertheless establish a close relationship with us as regular contractors. We like to help authors develop their prototypes into finished products. We pay advances against royalties, and our product managers serve as editors who help guide a product through the process of creation, production, and marketing.

But software publishing is not the only way to get into the industry. Another way is by means of a “production team”—that is, a group or company that concentrates on creating marketable products but leaves the actual sales of the product to another company that is geared up for a large-scale marketing effort. This side of the business, strictly speaking, is known as software development, and the companies that do it are known as developers rather than publishers. The idea behind such a company is to totally eliminate the marketing division and focus on developing all the talents, skills, and resources needed to create high-quality software that is so attractive and appealing that publishers will bid against one another to get it.

There are developers and there are developers, and their approaches are as different as their products. One of my favorites is Joyce Hakansson, who is neither the marketing czar nor the programming wizard of her outfit; the phrase most often used to describe her role in Joyce Hakansson Associates is that of “den mother.” It is an apt description in several senses. Her primary focus is neither on marketing nor programming, but rather on software's potential as a tool for awakening, nurturing, and stimulating the growth of our nation’s most important resource—the minds of our children.