Best Practices Study of Museum
CD-ROM Production

2. Overview of the Market

2.1 US
2.2 Canada

The following is a compilation of data from various sources on each of the US and Canadian markets for CD-ROMs. The following section focuses more on the US market than on the Canadian one. We have included an emphasis on the US market for the following reasons:

• Many respondents who were interviewed, as well as Canadian studies on multimedia, indicated that it is necessary to achieve US and/or international distribution if the CD-ROM is to be successful, particularly for more expensive CD-ROM products.
• The focus of the US data is on the children's educational CD-ROM market. Respondents tended to view CD-ROMs produced by Canadian museums as targeting this market segment, rather than the home entertainment segment.
• There is more published data outlining the size and trends in the US market for CD-ROM production than for the Canadian market. However, the US data may be useful in estimating Canadian market trends.
• The detailed data in the following section will help to provide valuable background information and context for institutions planning to produce and market a CD-ROM.

2.1 US

The following data presents an overview of the educational and home CD-ROM market in the US. The figures in this section are in US dollars.

• Home and school sales of children's educational software, including diskettes and CD-ROMs, totaled almost $2 billion in 1997 (Find/SVP).
• For 1997, the home market sales of children's educational CD-ROMs is estimated at $1.2 billion. The home market represented over $1 billion and the school market accounted for approximately $120 million (based on Find/SVP studies). (The majority of the school market, $840 million, is 'floppy' software). The term 'educational CD-ROM' is used in its broadest sense and includes games and entertainment (or 'edutainment'), as well as its traditional educational meaning.
• The numbers of CD-ROMs sold represent about 60 to 75 million units annually in the US.
• The home market for children's CD-ROMs will be approximately $2 billion and the school market approximately $300 million by the year 2000 (Find/SVP).

Home Market

• Packaged educational software for the home market, which includes diskettes and CD-ROMs, is almost $1 billion (Find/SVP).
• In 1997, 38% of American households had PCs (SPA).
• In 1997, 27% of US households with children between the ages of 12 and 17 owned computers (Find/SVP).
• In 1997, 12.5% of US adults owned a CD-ROM drive (Find/SVP).
• In 1997, the number of installed computer-based CD-ROM drives was 67 million worldwide (Freeman Associates).
• The number of CD-ROM disks purchased per household with a CD-ROM drive computer in the US is approximately 6 per year (Foreign Affairs and International Trade, based on other sources).

Educational Market

• The sales of floppy software to schools totaled $840 million in 1997 (Find/SVP).
• Integrated learning systems and packaged software in schools (CD-ROM) is estimated to be $120 million in 1997 (Find/SVP).
• The installed base of computers in K-12 education in the US ranges from 5 to 7 million units (SPA, based on several sources).
• The typical school spent approximately $91 per student on technology in the 1996/97 school year. This estimate includes $57 for hardware and $5.50 for software (Quality Education Data).
• The US ratio of students per computer is approximately 10:1. The student to multimedia computer ratio is 35:1 (National Center for Education Statistics, QED, Market Data Retrieval).
• School districts are 62% likely to purchase instructional software from consumer catalogues and directly from the publisher. Only 57% are likely to purchase instructional software from school software catalogues (QED).
• In US K-12 schools, 54% to 86% of schools own one or more computers with a CD-ROM drive. Multimedia computers represent 17% of the installed base (QED, CCA Consulting Inc.).
• An estimated 50% of schools have Internet access. Only 9% of instructional rooms have Internet access (NCE).
• A bestseller in the CD-ROM business sells approximately 50 000 units (FAIT, based on other sources).
• The average product life cycle for a game is 12 to 16 weeks; for educational or entertainment titles, 2 to 3 years (FAIT, based on other sources).

The US market is a large one with reasonably solid growth. The market in the US has matured faster than in Canada and the distribution channel structures are different. A large amount of CD-ROM and software (41% in the US) is sold through specialized software stores and computer specialty stores that also sell office products. Games are one of the biggest segments outside business products.

Market for CD-ROMs Produced by Museums

Interviews with museums in the US and a US multimedia publisher suggest that:

• The market for CD-ROM products produced by museums is estimated to be less than 1% of the market for US CD-ROM products. This represents approximately $10 million for 1997.
• Most publishers have not made profit on CD-ROMs produced by museums.
• Profitability of CD-ROMs to publishers will vary depending on the nature of the product. Generally, a publisher can expect a 'decent title' to sell 10 000 to 15 000 units, with 20 000 sales or more providing more profits. Despite ROIs, the publisher of the Smithsonian's CD-ROMs has not made money with this volume of sales.
• Large institutions such as the Smithsonian Institute were interested in CD-ROM production some years ago, but current emphasis is more on the use of the Internet to support technological initiatives.

2.2 Canada

The following is a compilation of data from Canadian museums distributing CD-ROMs, based on our interviews and surveys of industry participants.

• Canadian museums have produced approximately 40 CD-ROMs to date. These CD-ROMs include a small number of 'portfolio' CD-ROMs, which are primarily static images and text.
• Canadian museums have distributed an estimated 80 000 CD-ROMs.
• Assuming an average retail price of $35 to $40, the end users have purchased approximately $3 million of museum-produced CD-ROMs since the first CD-ROM was released. This translates into sales of roughly $500 000 to $1 million per year over the last three years to the home and school segments of the market. The museums, which typically obtain a share of the wholesale price, could have received approximately $500 000 from the above market since inception. This figure is considerably less than the expenditures of CD-ROM development for museums.
• Whereas most CD-ROMs are sold to the home segment, our interviews indicated that the main market for distribution of museum-produced CD-ROMs is the educational market. According to Micro-Intel, approximately 65% to 70% of museum-produced CD-ROMs are sold to schools.
• There are approximately 16 500 elementary and secondary schools in Canada.
• Canada's K-12 enrolment is 5.3 million students, approximately one-tenth the size of the US market.
• An average CD-ROM produced by a museum sells about 3 500 units. A strong Canadian title will sell approximately 15 000 to 20 000 units (which compares to 5 000 to 7 000 titles in 1995-96).
• McLelland & Stewart indicates that its Canadian encyclopedia CD-ROM, which retails at approximately $69.95, sold 150 000 units ¾ a bestseller by Canadian and international standards.