# SoftKey
**SoftKey** (originally SoftKey Software Products, Inc., later SoftKey International Inc.) was a Canadian-founded consumer software company that became the dominant consolidator of the 1990s educational and home software market through a low-price, high-volume retail model and a rapid series of acquisitions. Founded by [Kevin O'Leary](https://www.edgepedia.org/kevin-oleary) in 1986 in Toronto, Ontario, it absorbed WordStar, Spinnaker Software, The Learning Company, and MECC before renaming itself [The Learning Company](https://www.edgepedia.org/the-learning-company), Inc. in 1996, and it was sold to Mattel in 1999 in a deal described by The Telegraph as one of the worst in recent history.[1](https://eamon.wiki/SoftKey) • [2](https://joanganzcooneycenter.org/wp-content/uploads/2012/11/jgcc_edutainment.pdf) • [3](https://www.deseret.com/2000/9/30/19531474/mattel-is-practically-giving-away-its-money-losing-learning-co-unit/)
| Key fact | Detail |
|---|---|
| Founded | 1986, Toronto, Ontario, by Kevin O'Leary, as SoftKey Software Products, Inc.[1](https://eamon.wiki/SoftKey) |
| 1993–94 merger | Three-way merger with WordStar International and Spinnaker Software, announced August 18, 1993 at a value of $250 million; closed February 1994 as SoftKey International Inc., incorporated in Delaware[4](https://www.upi.com/Archives/1993/08/18/SoftKey-to-buy-Spinnaker-WordStar/4167745646400/) • [5](https://www.mobygames.com/company/14743/softkey-international-inc/) |
| Consolidation | By 1994, a billion-dollar consolidator in educational software that had acquired no less than sixty rivals[2](https://joanganzcooneycenter.org/wp-content/uploads/2012/11/jgcc_edutainment.pdf) |
| 1995 takeover | Hostile $606 million bid for The Learning Company, launched October 30, 1995 against its pending merger with Broderbund; same-day friendly $370 million stock swap for MECC[6](https://www.washingtonpost.com/archive/business/1995/10/31/software-firm-buys-one-rival-bids-for-another/378f9f70-89e8-43c1-8c40-9aa9e0e614d5/) |
| Renaming | October 1996: renamed The Learning Company, Inc., headquarters moved to Cambridge, Massachusetts[5](https://www.mobygames.com/company/14743/softkey-international-inc/) |
| Mattel sale | May 1999 merger with Mattel, reported at $3.5 billion in stock by the Associated Press and $3.6 billion by the Washington Post[3](https://www.deseret.com/2000/9/30/19531474/mattel-is-practically-giving-away-its-money-losing-learning-co-unit/) • [7](https://www.washingtonpost.com/archive/business/2000/02/04/ailing-mattel-forces-ceo-to-resign/40ca265c-0304-4b07-b885-b56da9891bad/) |
| End of the line | October 18, 2000: Mattel disposed of Learning Company to an affiliate of Gores Technology Group for future consideration rather than cash, taking a $430 million after-tax loss[8](https://www.sec.gov/Archives/edgar/data/63276/000089843003002040/d10k.htm) |
## Origins and the low-price model
The company built its business on price. O'Leary argued in 1993 that nobody wanted to pay $200 for software after buying a $499 computer, and SoftKey had introduced a line of products at $39.95 each as early as 1988.[9](https://www.csmonitor.com/layout/set/amphtml/1993/0614/14042.html) In the CD-ROM boom of the mid-1990s, SoftKey sold discs at dramatically lower prices than competitors, as low as $9.95 with mail-in rebates, and treated software as a commodity moved through mass-market retail rather than a premium product sold through specialty stores.[10](https://www.gamedeveloper.com/business/where-in-the-world-did-blockbuster-educational-games-go-) • [11](https://www.dgp.toronto.edu/public_user/RMB/csc454/lecture_5a%20-%202003.pdf) O'Leary told an Industry Canada study in 1995 that without a powerful distribution system through direct access to customers, retailers, or OEMs, it would be difficult to compete.[12](https://publications.gc.ca/collections/collection_2023/isde-ised/iu64/Iu64-197-1995-eng.pdf)
## The 1993 merger and consolidation
In May 1993 SoftKey agreed to merge with WordStar International, the declining word-processing pioneer, and in August 1993 the deal expanded into a three-way merger with Spinnaker Software worth $250 million, creating a company with estimated annual sales of $130 million.[4](https://www.upi.com/Archives/1993/08/18/SoftKey-to-buy-Spinnaker-WordStar/4167745646400/) • [13](https://www.latimes.com/archives/la-xpm-1993-05-14-fi-35282-story.html) The merger closed at the start of February 1994, forming SoftKey International Inc., incorporated in Delaware, with SoftKey chairman and CEO Michael Perik as chief executive and O'Leary as chairman.[5](https://www.mobygames.com/company/14743/softkey-international-inc/) • [4](https://www.upi.com/Archives/1993/08/18/SoftKey-to-buy-Spinnaker-WordStar/4167745646400/) The combined company sold consumer and home-office software through mass-market outlets including CompUSA, Walmart, Circuit City, and Costco.[4](https://www.upi.com/Archives/1993/08/18/SoftKey-to-buy-Spinnaker-WordStar/4167745646400/)
**Acquisition spree.** SoftKey then bought competitors steadily. By 1994 it had acquired no less than sixty rivals, including WordStar and Spinnaker Software, and had become a billion-dollar consolidator in the educational software market.[2](https://joanganzcooneycenter.org/wp-content/uploads/2012/11/jgcc_edutainment.pdf) Its catalog reached around 300 titles, ranging from WordStar to the Sports Illustrated Swimsuit Calendar.[6](https://www.washingtonpost.com/archive/business/1995/10/31/software-firm-buys-one-rival-bids-for-another/378f9f70-89e8-43c1-8c40-9aa9e0e614d5/)
## The battle for The Learning Company
The defining acquisition was hostile. On July 31, 1995, The Learning Company (TLC), a [Fremont, California](https://www.edgepedia.org/fremont-california) maker of educational software with 7,468,292 shares outstanding and a market value of about $291 million, had agreed to a stock-for-stock merger with Broderbund Software, a $1.5 billion publisher of titles such as [Carmen Sandiego](https://www.edgepedia.org/carmen-sandiego).[14](https://law.justia.com/cases/delaware/court-of-chancery/1995/14649-0.html) On October 30, 1995, SoftKey launched a two-tiered hostile tender offer: cash of $65 per share for 4.6 million shares, about 49 percent of TLC, with remaining shares to be exchanged for SoftKey stock, valuing the deal at $606 million.[6](https://www.washingtonpost.com/archive/business/1995/10/31/software-firm-buys-one-rival-bids-for-another/378f9f70-89e8-43c1-8c40-9aa9e0e614d5/) • [15](https://scholar.lib.vt.edu/VA-news/ROA-Times/issues/1995/rt9510/951031/10310110.htm) The same day, SoftKey announced a friendly agreement to buy Minnesota Educational Computing Corporation (MECC) in a stock swap worth $370 million, adding The Oregon Trail, Word Munchers, Number Munchers, and Storybook Weaver to its catalog.[6](https://www.washingtonpost.com/archive/business/1995/10/31/software-firm-buys-one-rival-bids-for-another/378f9f70-89e8-43c1-8c40-9aa9e0e614d5/)
SoftKey also filed suit in the Delaware Court of Chancery, *Kidsco Inc. v. Dinsmore*, seeking to postpone TLC's shareholder vote on the Broderbund merger and to solicit holders of 10 percent of TLC shares to demand a special meeting that would replace TLC's board with three SoftKey executives.[14](https://law.justia.com/cases/delaware/court-of-chancery/1995/14649-0.html) Broderbund's competing friendly offer was valued at $530 million in cash and stock against SoftKey's $606 million in cash.[16](https://www.latimes.com/archives/la-xpm-1995-12-07-fi-11314-story.html) SoftKey prevailed, purchased TLC for $606 million, moved its headquarters to Boston, and took The Learning Company as its name.[2](https://joanganzcooneycenter.org/wp-content/uploads/2012/11/jgcc_edutainment.pdf) In October 1996 the company formally changed its name to The Learning Company, Inc. and relocated its headquarters to [Cambridge, Massachusetts](https://www.edgepedia.org/cambridge-massachusetts).[5](https://www.mobygames.com/company/14743/softkey-international-inc/)
## Effect on the edutainment market
SoftKey's pricing changed the economics of educational software. Ken Goldstein, then vice president of entertainment and education at Broderbund, described how mass-market volume pushed production runs from 100,000 copies to 1 million and forced retail prices down from $49.95–$59.99 to $19.95, with wholesale slipping to $12 and margins of only $1–$2 per copy.[10](https://www.gamedeveloper.com/business/where-in-the-world-did-blockbuster-educational-games-go-) On those margins, the long prototyping cycles and high production values of premium edutainment titles became unsustainable, and the model SoftKey pioneered, combined with the CD-ROM boom, destroyed the economic viability of the edutainment production cycle.[10](https://www.gamedeveloper.com/business/where-in-the-world-did-blockbuster-educational-games-go-)
## The Mattel acquisition and collapse
In May 1999 Mattel merged with The Learning Company, with Mattel as the surviving corporation, in a stock deal the Associated Press valued at $3.5 billion and the Washington Post at $3.6 billion.[8](https://www.sec.gov/Archives/edgar/data/63276/000089843003002040/d10k.htm) • [3](https://www.deseret.com/2000/9/30/19531474/mattel-is-practically-giving-away-its-money-losing-learning-co-unit/) • [7](https://www.washingtonpost.com/archive/business/2000/02/04/ailing-mattel-forces-ceo-to-resign/40ca265c-0304-4b07-b885-b56da9891bad/) Mattel CEO Jill Barad had projected $50 million in profits from the division in 1999 and framed the purchase as a way to keep digital-age children connected to brands such as Barbie, Matchbox, and [Fisher-Price](https://www.edgepedia.org/fisher-price).[17](https://www.latimes.com/archives/la-xpm-2000-sep-30-fi-29172-story.html)
The division lost money almost immediately. Learning Co. lost $183 million in the fourth quarter of 1999 and $206 million for the twelve months ended December 31, 1999, causing Mattel's first annual loss in a decade.[18](https://www.forbes.com/2000/04/03/mu5.html) • [17](https://www.latimes.com/archives/la-xpm-2000-sep-30-fi-29172-story.html) What looked like strong sales turned out to be a product glut, much of it returned by retailers, and Mattel had bought the company just as children were moving from CD-ROMs to internet-delivered games.[17](https://www.latimes.com/archives/la-xpm-2000-sep-30-fi-29172-story.html) Mattel shares lost more than half their value after the purchase, and Barad was forced out in February 2000 over the division's losses, leaving with a severance package reported at $50 million.[3](https://www.deseret.com/2000/9/30/19531474/mattel-is-practically-giving-away-its-money-losing-learning-co-unit/) • [7](https://www.washingtonpost.com/archive/business/2000/02/04/ailing-mattel-forces-ceo-to-resign/40ca265c-0304-4b07-b885-b56da9891bad/) Mattel's board resolved on March 31, 2000 to dispose of the Consumer Software segment.[8](https://www.sec.gov/Archives/edgar/data/63276/000089843003002040/d10k.htm)
On October 18, 2000, Mattel handed Learning Company to an affiliate of Gores Technology Group in return for a contractual right to future consideration based on the business's income or 20 percent of its enterprise value after five years, with no cash up front, and took a $430 million after-tax loss on the disposal.[8](https://www.sec.gov/Archives/edgar/data/63276/000089843003002040/d10k.htm) • [17](https://www.latimes.com/archives/la-xpm-2000-sep-30-fi-29172-story.html) Against the roughly $3.5 billion purchase price, the loss on the deal worked out to about $430 million.[19](https://rip.so/reader-rabbit.html)
## Aftermath
Gores split the business. The games arm was branded GAME Studios in January 2001 and sold to the French publisher Ubi Soft in March 2001; the educational software arm kept The Learning Company name and was acquired by Riverdeep Interactive Learning Limited in September 2001.[20](https://www.mobygames.com/company/40/the-learning-company/) The Learning Company brand was wound down at [Houghton Mifflin Harcourt](https://www.edgepedia.org/houghton-mifflin-harcourt) around 2014, and no notable Reader Rabbit release followed a small 2018 iOS experiment.[19](https://rip.so/reader-rabbit.html)
## References
1. [SoftKey, Eamon Wiki](https://eamon.wiki/SoftKey)
2. [Edutainment Case Study, Joan Ganz Cooney Center (2012)](https://joanganzcooneycenter.org/wp-content/uploads/2012/11/jgcc_edutainment.pdf)
3. [Mattel is practically giving away its money-losing Learning Co. unit, Deseret News (Associated Press), September 30, 2000](https://www.deseret.com/2000/9/30/19531474/mattel-is-practically-giving-away-its-money-losing-learning-co-unit/)
4. [SoftKey to buy Spinnaker, WordStar, UPI Archives, August 18, 1993](https://www.upi.com/Archives/1993/08/18/SoftKey-to-buy-Spinnaker-WordStar/4167745646400/)
5. [SoftKey International, Inc., MobyGames](https://www.mobygames.com/company/14743/softkey-international-inc/)
6. [Software Firm Buys One Rival, Bids for Another, The Washington Post, October 31, 1995](https://www.washingtonpost.com/archive/business/1995/10/31/software-firm-buys-one-rival-bids-for-another/378f9f70-89e8-43c1-8c40-9aa9e0e614d5/)
7. [Ailing Mattel Forces CEO to Resign, The Washington Post, February 4, 2000](https://www.washingtonpost.com/archive/business/2000/02/04/ailing-mattel-forces-ceo-to-resign/40ca265c-0304-4b07-b885-b56da9891bad/)
8. [Mattel, Inc. Form 10-K for fiscal year 2002, SEC EDGAR](https://www.sec.gov/Archives/edgar/data/63276/000089843003002040/d10k.htm)
9. [Computer Software Prices Tumble Like Computer Hardware, Christian Science Monitor, June 14, 1993](https://www.csmonitor.com/layout/set/amphtml/1993/0614/14042.html)
10. [Where in the world did blockbuster educational games go?, Game Developer](https://www.gamedeveloper.com/business/where-in-the-world-did-blockbuster-educational-games-go-)
11. [Marketing of Software lecture notes, Ronald M. Baecker, University of Toronto (2003)](https://www.dgp.toronto.edu/public_user/RMB/csc454/lecture_5a%20-%202003.pdf)
12. [Software Products Distribution Trends and Impacts, Industry Canada (September 1995)](https://publications.gc.ca/collections/collection_2023/isde-ised/iu64/Iu64-197-1995-eng.pdf)
13. [Technology briefs, Los Angeles Times, May 14, 1993](https://www.latimes.com/archives/la-xpm-1993-05-14-fi-35282-story.html)
14. [Kidsco Inc. v. Dinsmore, 674 A.2d 483 (Del. Ch. 1995), Justia](https://law.justia.com/cases/delaware/court-of-chancery/1995/14649-0.html)
15. [SoftKey Launches Bid for Education Market, Roanoke Times, October 31, 1995](https://scholar.lib.vt.edu/VA-news/ROA-Times/issues/1995/rt9510/951031/10310110.htm)
16. [Battle for Learning Co. Is a Big Deal in PC Industry, Los Angeles Times, December 7, 1995](https://www.latimes.com/archives/la-xpm-1995-12-07-fi-11314-story.html)
17. [Mattel Cuts Its Losses by Giving Learning Co. Away, Los Angeles Times, September 30, 2000](https://www.latimes.com/archives/la-xpm-2000-sep-30-fi-29172-story.html)
18. [Mattel To Ditch The Learning Company, Forbes, April 3, 2000](https://www.forbes.com/2000/04/03/mu5.html)
19. [Reader Rabbit (1984–2014), rip.so](https://rip.so/reader-rabbit.html)
20. [The Learning Company history, MobyGames](https://www.mobygames.com/company/40/the-learning-company/)
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*Topic: Encyclopedia › Technology and the built world › Computing and digital systems › Software and programming › Software industry and companies › Industry structure and business models*
*Initially written Sep 17, 2026 · Reviewed: Sep 30, 2026; Oct 15, 2026 · Edited: Oct 15, 2026; Oct 25, 2026 · Last review: Oct 15, 2026*
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