I'm not one of more the knowledgeable people on TLC. I suggest
that you visit the TLC thread. The market for educational
software has suffered due to cutthroat competition. The
dominant companies have been competing for market share by
offering rebates which equate to giving the software away in
the hope of obtaining new customers. The extreme drop in the
prices of computers (the sub-$1000 soon to be sub-$500 PC's)
means that there should be some penetration of those households
which have not yet purchased their first PC, with a resultant
growth in the total market for software. Whether this translates
to growth in earnings depends on whether the development costs
of the software can be kept down and whether the market settles
out allowing the companies to sell the software for a profit.
In the former category, TLC is supposedly in decent shape,
able to produce a large number of titles with a small number
of development systems (many games in the same line can use
the same graphics engine, for example). In the latter category,
there is a big question mark. Cendant has been the main
competitor in most of TLC's chosen categories of programs,
and I don't see this competition simply going away. Another
way TLC can grow is by leveraging their distribution system,
due to their size and relationship with retailers. For example,
TLC merged with Broderbund not too long ago. Whatever sales
BROD had before, one could reasonably expect that more of their
titles would now be sold due to additional exposure, more
shelfspace, better marketing by TLC with tie-ins. On the other
hand, TLC has acquired some competing product lines, so some
of the value of the acquisitions may be lost when duplicate
products are eliminated.
TLC has started selling products over the Internet, and this
is an area of huge potential growth, although to what extent
the retails sales will be cannibalized remains to be seen. But
it is potentially more lucrative to TLC than retail sales since
the middleman is cut out. Customers may eventually forgo
receiving any game package at all, and simply download the
software. This is an idea which is periodically discussed, but
I'm not sure that it is ready for prime time. Customers are
attracted to the nice packaging of the games that they see in
a retail store. I speak from personal experience, as I probably
have over 100 computer games.
I have not the slightest idea how this translates into actual
sales numbers for the market in general, or for TLC in particular,
nor do I have any prediction of earnings or profitability. |
