Reading & Literacy

‘Hooked on Phonics’ Acquired by Educate Inc.

By Rhea R. Borja — January 25, 2005 2 min read

The education services company Educate Inc. has acquired the parent company of Hooked on Phonics, the controversial but popular literacy and math program advertised on television.

Hooked on Phonics has a large array of learning materials for children that it markets to parents.

The purchase ushers the Baltimore-based Educate Inc. into the early-education market and paves a way for the company to reach cost-conscious consumers, analysts say.

Educate, whose divisions include the K-12 tutoring-services giant Sylvan Learning Centers, announced the $13 million acquisition of the Santa Ana, Calif.-based Gateway Learning Corp. on Jan. 13. Included in the deal were the 600 Hooked on Phonics reading centers in child-care facilities nationwide, adding to Sylvan’s 1,000 tutoring centers.

“This is a very important step for Educate,” R. Christopher Hoehn-Saric, Educate’s chief executive officer, said in a Jan. 14 conference call with analysts. “Hooked on Phonics is really an American icon and defines phonics and reading programs for over 2 million customers. . . . [T]his is both a profitable and scalable business.”

In addition to the acquisition’s $13 million price tag, Educate will pay $6.6 million if Gateway Learning meets certain performance benchmarks, which so far are undisclosed. The company expects Gateway Learning revenues to be in “the single-digit million-dollar range,” said Kevin Shaffer, Educate’s chief financial officer. Gateway Learning, which has about 50 employees, will remain in Southern California, and most of the company’s senior management will also stay there, said Mr. Hoehn-Saric.

Chip Adams, the chairman of Gateway Learning, was unavailable for comment.

The acquisition will help Educate aggressively expand its services to more families in more locations, said Kirsten Edwards, a vice president and knowledge-services analyst with Think Equity Partners, an investment bank based in San Francisco. Tutoring services at Sylvan Learning Centers can cost in the thousands of dollars for one student, while Hooked on Phonics’ “Learn to Read” reading kit costs about $300.

The purchase follows Educate’s announcement in December of its partnership with the education software and toy company LeapFrog Enterprises Inc., based in Emeryville, Calif., to open learning centers in up to 20 Wal-Mart stores.

FTC Complaints

Gateway Learning has a checkered past. Last year, the company settled a complaint by the Federal Trade Commission that it sold customers’ personal information to marketers, a violation of company policy.

And in 1994, the FTC charged that the company made promises that it could not fulfill: that the Hooked on Phonics programs could teach anyone to read, regardless of learning disabilities or other limitations. The company, then called Gateway Educational Products, agreed to ditch its advertising campaign as one of several concessions to settle the FTC claim.

But Gateway Learning’s controversial history is a nonissue for Educate Inc., Mr. Hoehn-Saric said. The Hooked on Phonics materials have improved over the past decade, he said.

“Can a single program hope to teach every single child? That’s an impossible task,” he said. “I don’t see it as a substitute for what happens in the classroom, but as a supplement for parents in the home.”

Furthermore, Educate bought Hooked on Phonics for the brand name, and that’s what consumers remember, said Trace Urdan, a senior research analyst with Robert W. Baird & Co., a Milwaukee-based investment firm.

“What consumers remember about Hooked on Phonics is not that they overpromised and underdelivered,” he said, “but that it helps kids learn to read.”

A version of this article appeared in the January 26, 2005 edition of Education Week as Hooked on Phonics’ Acquired by Educate Inc.


Jobs The EdWeek Top School Jobs Virtual Career Fair
Find teaching jobs and other jobs in K-12 education at the EdWeek Top School Jobs virtual career fair.
This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
Student Well-Being Webinar
Embracing Student Engagement: The Pathway to Post-Pandemic Learning
As schools emerge from remote learning, educators are understandably worried about content and skills that students would otherwise have learned under normal circumstances. This raises the very real possibility that children will face endless hours
Content provided by Newsela
Teaching Live Online Discussion How to Develop Powerful Project-Based Learning
How do you prepare students to be engaged, active, and empowered young adults? Creating a classroom atmosphere that encourages students to pursue critical inquiry and the many skills it requires demands artful planning on the

EdWeek Top School Jobs

Teacher Jobs
Search over ten thousand teaching jobs nationwide — elementary, middle, high school and more.
View Jobs
Principal Jobs
Find hundreds of jobs for principals, assistant principals, and other school leadership roles.
View Jobs
Administrator Jobs
Over a thousand district-level jobs: superintendents, directors, more.
View Jobs
Support Staff Jobs
Search thousands of jobs, from paraprofessionals to counselors and more.
View Jobs

Read Next

Reading & Literacy Is the Bottom Falling Out for Readers Who Struggle the Most?
A growing proportion of 4th and 8th graders read at the lowest level on national tests. Experts are working to understand why.
5 min read
Reading & Literacy Popular 'Wonders' Curriculum Shows Gaps in Alignment to Reading Research
A new review claims that the curriculum has gaps in its alignment to reading research, and doesn't offer enough supports for teachers.
6 min read
Image of a girl selecting a book in the library.
Reading & Literacy Pandemic Prompts Some States to Pass Struggling 3rd Graders
As families wrestle with online learning, a pandemic economy and mental health difficulties, some states are delaying 3rd grade retention.
Aallyah Wright,
8 min read
The Mississippi Department of Education offices are seen in Jackson, Miss. on March 19, 2020. The state's board of education decided this winter that it would suspend the retention policy for third graders this year, allowing all students to pass on to the fourth grade even if they fail the standardized reading test.
The Mississippi Department of Education offices are seen in Jackson, Miss. The state's board of education decided this winter that it would suspend the retention policy for 3rd graders this year, allowing all students to pass on to the 4th grade even if they fail the standardized reading test.
Rogelio V. Solis/AP
Reading & Literacy Opinion Seven Strategies for Grammar Instruction
Five educators share instructional strategies for engaging and effective grammar instruction.
14 min read
Images shows colorful speech bubbles that say "Q," "&," and "A."