CD-ROM MARKETERS HIT A CROSSROAD REWARDS WILL BE BIG FOR THOSE WHO SURVIVE THE COMING SHAKEOUT

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The CD-ROM revolution is in full swing, but savvy players in the field aren't celebrating yet.

A massive shakeout is ahead for hundreds of CD-ROM developers who unveiled new software at this month's Winter Consumer Electronics Show in Las Vegas, and consumer confusion about CD-ROMs is far from resolved.

Developers exhibiting at the show acknowledged that consumers continue to encounter mechanical problems with CD-ROMs, and their technical support lines are often jammed up.

Consumers are coming to the realization that CD-ROM drives are difficult to install, and incompatibility problems are frequent. Meanwhile, software support telephone lines, including those for Walt Disney Co.'s "The Lion King" CD-ROM, are often swamped by families who've discovered their computers don't have the right hardware to play the discs.

In addition to alleviating consumers' operational difficulties, CD-ROM marketers also face steep marketing challenges in differentiating their wares from thousands of new offerings on every imaginable subject from entertainment to education to self-help to pornography.

"There's definitely too much hype right now about CD-ROMs-it can't meet the market demand," said Eric Winkler, public relations manager for Broderbund Software, Novato, Calif., marketer of the hit CD-ROM game "Myst." "The influx of new games is confusing to consumers, and it's going to make the business even more challenging for successful marketers."

Despite these difficulties, the long-term outlook for CD-ROMs is bright-that is, for marketers who survive the coming shakeout.

The number of CD-ROM titles published this year will nearly double to 4,000 over last year's 2,400, according to PC Data, a Reston, Va.-based market researcher. Other industry observers are even more bullish, saying the figure may be as high as 7,000.

Only 10 million U.S. homes have CD-ROM drives now, but industry experts believe 60 million will be equipped by 1998. Although CD-ROMs will eventually be pushed aside by newer, faster technologies yet to reach the marketplace, the platform is expected to dominate home entertainment and education channels for the next five to 10 years.

But the next six months will be a crucial period for established CD-ROM marketers, who face an onslaught of new and frequently mediocre offerings that may dampen consumers' enthusiasm.

"There's a lot of garbage out there, and we're very concerned about how many consumers will be discouraged by what happens when they get a poor CD-ROM title for free with their CD-ROM hard drive kit," said Basel Dalloul, chairman of Magnet Interactive Studios, a Washington, D.C-based multimedia developer. "Some people may walk away disgusted before they ever experience a high-quality CD-ROM that's everything the medium can be."

Magnet is attacking the problem by producing a library of "very emotional, very experiential" titles it hopes will be "as engrossing as films and excellent TV programs," Mr. Dalloul said. The company will back the titles with an "aggressive, creative marketing campaign," although no details have been revealed.

Three of Magnet's first titles, to be released in March for about $55 each, include: The Wall, based on the Vietnam War memorial in Washington, D.C.; Comedians, a comedy club on CD-ROM; and Chop Suey, a "creative play" disc for girls.

Dozens of other CD-ROM marketers promise equally high-quality offerings this year, including The Discovery Channel's TV documentary-based titles; Spectrum HoloByte's lineup of flight simulator and Star Trek-theme games; and GTE Interactive's lineup of educational and strategy games.

For companies like Big Top Productions, the goal is simply to remain focused on what's important: creating a disc people want to use again and again. Big Top currently markets several CD-ROMs for children and adults including The Groove Thing and Cartoon Toolbox Starring Felix the Cat, with several more titles due later this year.

"There's a tremendous amount of competition, but the key to success will be differentiating ourselves from the masses with high-quality offerings that do more than just give people 30 minutes of entertainment," said Lisa Van Cleef, Big Top's VP-communications.

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