Big Fish, Little Fish: As more large companies step into the education technology arena, smaller companies are having more difficulty surviving.
The strategic moves of Sunburst Communications and FamilyEducation Network last month illustrate how some small companies are adapting to this trend.
Sunburst, a school video and software company in Pleasantville, N.Y., that has operated independently since 1972, agreed to be acquired by the textbook publisher Houghton Mifflin Co. for $33.5 million.
And FamilyEducation Network, a Boston-based company that provides World Wide Web sites with educational content to schools and parents, secured $51 million in investments from other companies, including textbook-publishing giant Harcourt Inc., and made various marketing agreements with some of them.
"When there were a lot of small companies in the market three years ago, it was more of an equal playing field," said Dean Kephart, the senior vice president for Connors Communications, whose clients include The Learning Company. TLC accumulated 17 education technology companies over the past three years, increasing its value to $3.8 billion, before agreeing last year to be acquired by an even bigger company, Mattel Inc.
In today's market, small companies often can't put together the sales force they need to compete with large companies, Mr. Kephart said.
"The economies of scale need to be there," agreed Conall E. Ryan, the president and publisher of the Houghton Mifflin Interactive Corp., the division of the publishing house that purchased Sunburst. Sunburst's products include Fraction Attraction and Type to Learn!.
FamilyEducation Network, meanwhile, will greatly strengthen its marketing efforts by partnering with Harcourt, said Jonathan Carson, FEN's co-founder and chief executive officer. The company has agreed to feature Harcourt content and services online; in exchange, Harcourt's sales force will promote FEN.
FEN also announced that it had secured new investments from American Online Inc., Jostens Inc., and Intel Corp., plus a venture capital firm and a global investment company. (FamilyEducation also has a partnership with Education Week to distribute some of the newspaper's content.)
"It's an age where there are clearly consolidation forces under way. We're a little guy, and there are a lot of big guys out there," said Mr. Carson. "An important way to extend your reach is partnership."
--Mary Ann Zehr [email protected]
Vol. 18, Issue 35, Page 8Published in Print: May 12, 1999, as Business