Four years later, having fumbled its early chance to dominate the market, Britannica, Inc. sold its interest in Compton’s to the Chicago-based Tribune media group. By the time Britannica tried again, and released its own expensive and unexciting Britannica CD-ROM in 1994, it had already lost out to Microsoft’s much cheaper all-bells-and-whistles Encarta by a year. And it was no consolation for the Britannica executives to tell themselves that Encarta was an inferior product. In fact, it was only inferior when judged by the reverentially high standards of print; judged by the clickable criteria of the new world, it would change the game.
Encyclopaedias behind them, the future ahead: Bill and Melinda Gates like what they see
The development of Encarta wasn’t smooth, but its main champion – Bill Gates himself – was persistent. After Britannica had rejected its overtures, Microsoft pursued its encyclopaedic content one rung down, to the popular and successful World Book. But World Book also turned down a Microsoft partnership, as did Collier’s. Like Britannica, the publishers feared a big dent in print sales, and World Book was hatching plans to launch its own disc version in 1990. Microsoft’s frustration increased when it learnt that Grolier would soon be partnering with Apple, making its content more easily accessible with a point-and-click mouse than it was in the PC MS-DOS version.*
In 1989, Gates finally found a match in Funk & Wagnalls, the company that reasoned that if it wanted to sell its low-budget encyclopaedias to a mass market, the best place to do that might be in supermarkets.*
Once a licensing deal was agreed, Microsoft set about enhancing the text for its digital offering. The Grolier had been criticised for including only grainy images in its disc, and so Microsoft employed the great media buzzword of the time – synergy – to use its recently created Corbis photo and video library to bring Encarta alive. Faced with storage limitations (at a time before MP3s and efficient image compression), Encarta editors added clips that would grab most attention at its presentations – the Apollo moon shots, a recording of Einstein, spuming whales. It also included more entries on popular culture and business affairs, and it reflected as many recent events as it could. Meanwhile, in the world of ink and tree-felling, Britannica kept on pushing its exhaustive and leaden yearbooks.
The initial launch of Encarta towards the end of 1992 was not a success. Its marketing team missed the holiday season, and it was deemed much too costly at $295. But the following year it tried again. It now cost only $99, and was faster and more exciting than its rivals (it included a video clip of the Israel–Arab Oslo peace accord that occurred only a few weeks before its release). It received solid but not rave reviews, yet the sales were phenomenal.
Encarta sold 120,000 copies in the 1993 holiday period alone, and production couldn’t keep up with demand. In its first year 350,000 copies were ordered, and 1 million the year after. Clearly, no encyclopaedia had ever sold like this.
Initially, users didn’t seem to mind that they were reading a less-than-great series of articles; the fact they were accessing such a fast reference tool on a screen, without a visit to the library or an outdated print volume, was appealing enough, and the audiovisual buzzes were fun too. A modern encyclopaedia may even have appealed to the modern child the way it was supposed to in the adverts, although most of their time with Encarta was probably spent clicking on the videos. Over the next few years, Microsoft did much to increase the quality of its product, meeting an educational responsibility it had never expected to bear.
‘We consciously invested in the contextual value,’ wrote Tom Corddry, Encarta’s former team leader, on the New York Times website in 2009. ‘In expanding the core content, in creating the world’s first truly global encyclopedia, and in an efficient update cycle. We had enough “multimedia” in the original product to keep the reviewers happy, but focused on the overall usefulness of the whole product much more than on the relative handful of video clips.’
Corddry disputes the idea that Funk & Wagnalls’ original text was low quality compared to Britannica. For Encarta’s needs it was almost ideaclass="underline" its ‘structured data’ ensured a consistency of text from one article to the next, easing the construction of a highly efficient set of links and navigational tools across the entire content.
‘Britannica, by contrast, was a bloated mishmash,’ Corddry maintained, ‘a consequence of its long tradition of having articles written by many different celebrity authors … I’d argue that within its first five years, Encarta became the best encyclopedia in history: it had tremendously consistent quality and usefulness across a very broad range of topics, and added a great deal of value by the relationships it illuminated between topics.’
All of this has since been rendered a bit quaint, the Encarta chief conceded, but in its day it did more than unsettle the traditional print encyclopaedia – ‘it pretty much destroyed it.’
In 1990, the last year it saw a profit, Britannica made $40 million on a sales revenue of $650 million. That year it sold 117,000 printed sets, but by the time revenue dropped to $453 million in 1994 it was selling only 51,000, and a large proportion of its sales force (2000-plus in 1990) was being laid off.
‘We need capital and are confident we can secure it,’ said Peter B. Norton, the company’s president, in a statement in April 1995. But Britannica, Inc. took more than a year to find a buyer, and when it did, the Swiss investor Jacob Safra paid only $130 million, a fraction of its value in the 1980s. By 1996, revenue had fallen to $325 million, sales were just a few thousand sets each year, and losses were mounting. At the time of the sale, computers were in more than a third of American homes. The exciting writing was on the screen.
But there was another way of looking at this. Perhaps Britannica and other traditional encyclopaedias had simply misjudged the competition: the boxer it thought it was fighting was actually someone else.
In 2000, Britannica’s fall had been studied by two senior vice-presidents of the Boston Consulting Group. In the opening pages of Blown to Bits, their account of what they call ‘the new economics of information’, Philip Evans and Thomas S. Wurster considered that the company simply underestimated the challenge. ‘Judging from their inaction, Britannica executives at first seemed to have viewed the CD-ROM encyclopaedia as an irrelevance: a child’s toy, one step above video games. This perception was entirely reasonable.’*
One reason for this was a predicament they shared with almost every other traditional business: old incumbents were saddled with ‘legacy assets’ – bricks and mortar, sales and distribution teams, mainframe systems. It was just hard to destroy these things. ‘Instead, blame comes into play, and last-ditch financial calculations hit a wall of internal political debates and personal self-protection.’
Then there were the psychological elements. Evans and Wurster argue that the key decision makers at Britannica were blinded by their own history and myths, making them unable to appreciate something that didn’t fit into their collective mental framework. Worse, they failed to see how one of their oldest and most reliable sales principles – parents wanting to do something valuable for their children’s education and feeling bad if they didn’t – had been subconsciously transferred to a new medium. ‘If the fundamental value proposition is assuaging parental guilt, then the fundamental competitor is not Encarta, it is the PC.’ Writing twenty years ago, Evans and Wurster state