SoftKey

» see softkey.com as it lived, on the wayback machine

~ the last words ~

softkey was the kind of company an american middle schooler in 1996 would have known indirectly, through the shrink-wrap on their carmen sandiego box. i was in ankara in the mid-nineties. our windows 95 machine ran encarta 97 for homework and a lot of dos-era action games. no softkey shrink-wrap ever crossed our floppy drive or our cd-rom tray. the brand mattered to me later, in retrospect, only because it turned into the corporate skeleton behind the great mattel writedown of 1999.

softkey started in 1986 as softkey software products, out of toronto, on a ten-thousand-dollar loan from kevin oleary's mother. oleary and cofounder john freeman spent the late eighties publishing small utility titles and doing distribution deals. the real business model landed in february 1994 with a three-way merger that pulled in spinnaker software and wordstar international under the softkey banner. the merged entity relocated to cambridge massachusetts and reincorporated as softkey international.

from there it turned into a shark. the strategy was to buy underpriced edutainment publishers on the cheap and stack their catalogs on office depot shelves at $19.99 in a shrink-wrapped box, cutting staff as fast as the deals closed. margins came from volume and shelf space rather than title-by-title profit. the industry called the approach the softkey model. the industry meant it as an insult.

~ the record ~

~ the early days ~

oleary was the sales personality who fronted the retail push. softkey partnered with staples and office depot to build the boxed-software end cap in the mid-nineties, back when a family walking into a big-box store to buy a cd-rom title was still the mainstream way people got software. the roll-up thesis worked partly because everyone else was building for that channel too, and softkey could out-buy them one target at a time.

the december 1995 hostile takeover of the learning company for six hundred and six million dollars was the piece that made softkey a household name in publishing. the learning company had reader rabbit and a serious catalog of grade-school titles. softkey paid a heavy premium and got the shelf space. the january 1996 rollup consumed compton's newmedia. in may 1996 came mecc for three hundred and seventy million dollars, bringing oregon trail and the number munchers series into the same catalog.

~ what it swallowed ~

by mid-1996 the roll-up had swallowed most of the biggest us edutainment names into a single publisher. the learning company brought reader rabbit and a whole grade-school shelf. mecc brought oregon trail. between them plus the compton's reference catalog and the older wordstar productivity line, the parent had almost the entire us edutainment shelf under one distribution operation. in october 1996 the corporate name changed. softkey international took the name of the learning company inc and swapped its nyse ticker over to tlc. the softkey brand went out of print on the shrink-wrap almost immediately. the learning company blue swirl became the new corporate face.

after the rename the acquisition treadmill kept going. broderbund fell in august 1998 for four hundred and sixteen million dollars, bringing carmen sandiego and myst under the same roof. mattel bought the whole conglomerate in may 1999 for around four billion dollars in stock. inside twelve months the tlc division delivered a fourth-quarter loss that dropped mattel stock value by billions in a single day. gores technology took the assets off mattel's hands in september 2000 for twenty-seven million dollars. the tlc catalog passed through riverdeep and then houghton mifflin before drifting into copyright limbo.

~ the funny part ~

the softkey brand died because the roll-up became too visible to keep operating under a name that industry analysts had started saying with a sneer. taking the learning company name gave the parent a friendlier public face without changing the underlying business. this worked for exactly three years. by 1999 the mattel deal was closing and by 2000 the whole conglomerate was worth a rounding error on gores' books.

kevin oleary landed on his feet. he walked out of the mattel sale with tens of millions in stock and a public role that eventually turned into the shark tank chair he still holds. john freeman went quieter. the softkey brand itself, and the retail-channel volume model it invented, remains one of the cleaner cautionary tales in the cd-rom era.

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