Software sales boom in '98

Software titles flew off the shelves in 1998, although heavily discounted prices tempered sales revenues, a new survey has found.

Although software sales revenue did grow 13 percent in 1998 compared to the previous years, unit sales were up a whopping 32.6 percent, according to the survey released today by PC Data.

Top 5 software publishers, by revenue
Rank	Company
1.	Microsoft
2.	The Learning Company
3.	Havas Interactive
4.	Intuit
5.	Hasbro
Source: PC Data

Revenues were adversely impacted by rebate-happy publishers and the trend toward rock-bottom prices in the consumer and business markets, according to Roger Lanctot, an analyst at the Reston, Virginia-based market research firm.

"The lower costs of computers certainly is contributing to the demand for low-cost software," said Lanctot, pointing to recent data indicating that the average cost of a PC dipped below $1,000 for the first time in December. "There's cheap monitors, cheap scanners, cheap printers-- everything's going down, and that's driving interest and demand for software."

"Retailers have more leverage to pull people into stores," packed with low-cost peripherals and PCs, he added. Additionally, two-for-one sales, mail-in upgrades and rebate refunds are driving software sales, he said.

"Rebates have a lot to do with sales--anywhere from a third to half of all software offers in CompUSA's mailers will include rebates of one kind or another," Lanctot said. "Consumers out there are getting good deals."

Microsoft was the largest software publisher by revenue, accounting for over 23 percent of the total sales in 1998, and 42 percent of business sales. On the other hand, by unit shipments, gaming publisher Havas Interactive, formerly Cendant Software, took the No. 1 spot. Hava markets popular gaming and educational titles like Starcraft, Play with the Teletubbies, and Mathblaster.

Intuit, publisher of the popular Quicken personal finance suite, dominated the finance category, accounting for 81 percent of the total finance revenue.

In a trend confounding conventional thinking, encyclopedia sales drove growth in the reference market for the first time in several years. Most observers believed that the advent of the Internet, with all its free resources, would decimate demand for CD-ROM encyclopedias.

In fact, reference unit sales were actually up 20.9 percent in 1998, led by The Learning Company, which took the No. 1 spot with 40 percent of sales. "You would have thought with a library of infinite capacity at every desktop," reference sales would continue to fall, Lanctot said. But just the opposite has happened.

"It seems counter-intuitive, yet for the first time in several years, sales of reference titles actually increased. It defies the experts, including us."

Another growth area last year was voice recognition applications such as IBM's ViaVoice. "It is a bright spot in the business category," which overall did not achieve significant growth. "There's an absence of any major killer business applications," he said.

"The major turning point next year will come with the introduction of Office 2000 [from Microsoft]. Last year, there was no major business product introduced."