Just as aspiring authors of yesteryear wanted to pen the Great American Novel, the entrepreneurial artistes of this generation want to encode the Great American Computer Program, strike it rich and retire before the age of 25. It has become computerdom's version of The American Dream
Hundreds of companies, mainly in California's Silicon Valley, have sprung up to spin out that program and go for a share of what many analysts project will be a $12 billion market by the end of this decade. Some believe that most of these "software publishing" companies simply won't survive, that they won't have the product, the savvy or the money. And besides, the market isn't that big.
When the Great Software Shakeout occurs--and it will--one of the survivors is likely to be Reston Publishing Co.--a local company that is trying to blend entrepreneurial verve with the ample cash backing of its parent--Prentice-Hall, the giant New Jersey-based textbook publisher.
In less than two years, Reston has managed to become one of the country's largest and most profitable publishers of computer books. In 1982, computer books accounted for more than $4 million of the company's sales. This year, the number will more than triple to $12 million.
By one analyst's estimate, Reston Publishing is now one of the three biggest publishers of computer books in the business. And computer books, as Publishers Weekly reports, have begun to rival gothic novels, diet guides and cat books as a mainstay of the industry.
In the midst of this exponential growth, Reston's management is positioning the company to take on the bright-eyed entrepreneurs from California by moving aggressively into the personal software market. This summer, its computer-book publishing and software efforts were consolidated into a single division whose mission is to establish a national presence in the software market.
There are a lot of people who wonder why a company located in suburban Virginia thinks it can compete in an industry in which most of the talent is located on the West Coast.
"We almost called ourselves 'East Coast Software,' " says Larry Benincasa, the publisher of the Reston Computer Group, "just to acknowledge that we were different." There is an East/West dichotomy, he says, and it has to be overcome in order for Reston to succeed. On the other hand, he says, the company offers a lot to the software author--including a sense of stability and the immense resources of Prentice-Hall.
What's ironic here is how characteristically stodgy publishing companies like McGraw-Hill and Prentice-Hall have come to view software as a natural extension of their book-publishing activities. For one, the companies have reaped enormous profits from the recent boom in computer books. Now they're sensing that the leap from books about computers to software for computers is one they should chance. Of course, sensing an opportunity and doing something about it are two different things.
That's why Reston is in such an intriguing position. It's geared to be able to move quickly into new markets. Thus far, it's been quite successful. In its 12-year existence, "We have never failed to have a 20 percent pre-tax profit or better," says David Ungerer, Reston's president, "and we've never failed to have a 30 percent increase in that profit per year." Reston is expected to gross more than $30 million by the end of this year.
"We're an entrepreneurial company that will lead the way for the parent," says Benincasa, "I think Prentice-Hall looks upon us as management for growth."
Reston has been so successful that its management half-seriously jokes about doing a leveraged-buyout to take the company away from Prentice-Hall. While that doesn't seem likely, it's clear that Reston thinks it has exceedingly bright prospects because of the personal-computer revolution.
When the company was created, says Ungerer, "The original mission as far as Prentice Hall was concerned was that we'd be another college textbook company. They wanted us to be another Prentice-Hall and we felt we had to be something different."
Prentice-Hall--the biggest college textbook publisher in the country--started up the new division because it would have run into antitrust problems if it had tried to acquire another publisher.
"There was really no specific charter for us," says Ungerer, a small, trim Navy man who found his job at Prentice-Hall through a chance meeting on an airplane. He agreed to help start up Reston because he thought it would be fun.
Very quickly though, it became clear to Ungerer, a former editor of humanities books, that books about technology offered the quickest way for the young company to achieve growth. Appropriately enough, Reston's first book was "The Executive's New Computer."
In 1978, the company moved into computer books in earnest. "Our approach had always been from the technology and electronics side," says Benincasa, who's been with Prentice-Hall and Reston for 14 years. The company had been publishing a line of quality textbooks about electronics, computer science and topics where those two disciplines intersect.
But they also began to notice that the personal computer was beginning to make an impact. Several of Reston's writers were personal-computer owners. They began to approach Reston with the idea of publishing books for this new market, for the personal-computer owner who wanted to be able to do something with his machine.
"In 1980, our Apple Machine Language book sold ten times over expectations," says Benincasa. "By now it's sold over 100,000 copies." Reston quickly published six more personal computer books, with total sales in excess of 125,000.
"In publishing, the average sale per title is about 5,000," says Benincasa, "with computer books, our average is 20,000."
Knowing a good thing when they had one, Reston took the plunge and invested hundreds of thousands of dollars to have books written about the Apple, Atari and Timex/Sinclair computers. Some of the books were done on what's known in publishing as the "Q&D," or "quick and dirty," but it enabled Reston to get in on the ground floor of what has become the biggest growth segment in all of book publishing.
By the end of this year, Reston will have published more than 130 computer books. Another 75 are in the works for 1984.
"Luck has had nothing to do with this," Unger insists, "We're really market analysts. That's what we do."
The personal-computer market clearly did not end with hardcover and paperback books. Ungerer and Benincasa understood that computer books were merely a complement and a supplement to the machines. Software was really where the market was headed and they wanted to exploit their publishing expertise to get at it. They wanted their software to embrace everything from business applications to educational recreation.
"We had a natural progression," says Benincasa, "from machine-specific books to software. But we're not going to compete with the electronic spreadsheet people . . . we're looking for our own niche. We're interested in education, business and recreation, but we want the price points for our software to be similar to those for our books."
Though there are similarities between software and books as marketable commodities, the differences are vast enough to undermine a publisher's transition from one to the other. As Benincasa points out, an editor can usually determine after the first three chapters whether or not a book will be successfully completed. With computer software, the product has to be completely finished to determine whether or not it can be brought to market. Oftentimes, encoding that last 10 percent of a program can prove insurmountable.
Moreover, a computer program is part of an overall package of information--including instructions on how to use it effectively. Publishers have traditionally sold only books, not customer support. Making sure the customers can actually use their software places additional responsibility on the publisher.
And for a publisher like Reston, which had always targeted specialized audiences, software demands the ability to mass market. Reston can draw on the elaborate distribution channels offered by Prentice-Hall, a company with over $500 million in revenues, but there are no guarantees that a bookstore owner will trust a book publisher's judgment about personal computer software--or even that computer owners will buy their software at a bookstore.
Although software is not a book and no amount of wishing can make it so, Reston is approaching software design in a way that minimizes the difference, insists Nikki Hardin, who started at Reston as a secretary and is now senior editor of its computer group. She's quite comfortable with the software-as-book metaphor.
"Look at novels," Hardin says, "they are interactive entertainment much in the way computers can be. Software can be interactive like novels in the sense that what's on the screen provokes an emotional response. We think it's the creative aspect of people, playing creatively, which is what people want.
"Why do people take guitar lessons or take home movies? That's the utility we're looking for in our programs. Right now, most software companies aren't marketing to people--they're marketing to extensions of joysticks."
Back in 1981, Hardin and Benincasa conceived the "Creative Pastimes" software line. The idea was to come up with something that blended education, entertainment and recreation values. The first title, introduced last year, was "Paint," a computer graphics program from Washington's Capital Children's Museum that lets the user turn the Atari computer into a palette, paintbrush and canvas. The program has won some fairly kind reviews from several personal-computer magazines and was selected by the Book-of-the-Month Club for its catalog of computer products.
Reston will introduce seven "Creative Pastimes" programs by year's end and expects to introduce 15 more next year.
Moreover, the company is moving very cautiously and not expecting multimillion unit sales at Christmas. Hardin wants the product to have shelf-life as well as sales.
"We're not trying to explode into the market," she says. "And many of the people who work with us find that reassuring."
Reston's strategy is in sharp contrast to the videogames companies like Atari, Activision and Imagic, which have viewed the software market as a "hits" business and have suffered multimillion dollar losses this past year.
Reston's approach of expecting moderate sales per package--a reflection of the inherent conservatism of the publishing business--may ultimately be what allows the company to survive as a profitable player in the software market. Even if Reston makes several stupid and costly decisions, Prentice-Hall can be there to bail the company out.
However, perhaps Reston's strongest lure to budding software authors is the impression that the company has a sense of what software should become.
"There really is a lack of recognition that software is a medium that should be made accessible to non-technical people," says Stuart Rosen, a former Atari employee who now runs Flyghts of Fancie, a California software-design company. Rosen has been working with Reston on a Creative Pastimes project.
"They really have a recognition of what it takes to create something," he says. "With Prentice-Hall, they could create a powerful force in this market, which is really in an immature state now."
Reston makes no secret of ambitions to become a major force in software and acknowledges that that will mean the company must transform itself.
"The fact is," says Ungerer, "we expect that in the first quarter of 1986, software will overtake bookware in total revenues."
Bookware? "Well," says Ungerer, "books is a good enough term for me. . . . "
Despite the company's surge in growth and shift in emphasis, employe turnover has remained remarkably low. What's more, the company managed to keep employment levels close to 100 even as its sales skyrocketed.
"What's kept me up lately," says Ungerer, "is that we've created a model of growth and deviated from it. In one year, our sales are up 70 percent and profit is up over 100 percent. You can't create a model that always gives you that sort of growth. We're riding a crest now and we're frantically trying to create an environment to continue on that crest."
"This has been our most successful year," says Benincasa, "and success does cause anxiety. But it's self-imposed."
Ungerer has Reston looking at the training and personal financial services markets, what he calls "action businesses," as fuel to further the company's phenomonal growth. But it's clear that software will make or break Reston's future. By Christmas of next year, Reston will have a solid idea of how good that gamble is.