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Dead End: Encarta

Abstract

Encarta was Microsoft’s CD-ROM encyclopedia, and its whole life is a two-part lesson in how far the cost of distributing knowledge can fall. Microsoft built it from an encyclopedia Britannica had turned its nose up at, priced it at a fraction of a printed set, and inside a decade helped destroy a 200-year-old industry: Britannica’s sets sales fell from 120,000 in 1990 to 40,000 by 1996, and the company was sold at a fire-sale price. Then the same thing happened to Encarta. A free encyclopedia written by volunteers grew larger, fresher, and more linked than anything Microsoft could ship on a disc. Microsoft announced Encarta’s end in March 2009 and closed it that October. The encyclopedia that killed the encyclopedia was killed by an encyclopedia.

The Pitch Britannica Refused

In 1985 Microsoft approached Encyclopædia Britannica about putting its text on CD-ROM. Britannica declined. Its business ran on a commissioned door-to-door sales force selling leather-bound multi-volume sets for well over a thousand dollars, and a cheap disc threatened both the price and the salesmen. Britannica’s brand was the most respected in the field, its content the deepest, and its management saw no reason to undercut a profitable print operation for an unproven format.

Microsoft went looking for content it could license instead. By 1989 it had a non-exclusive deal for the text of Funk & Wagnalls, a middlebrow encyclopedia best known for being sold a volume at a time at supermarket checkout counters. It was not Britannica. It was available, and Microsoft was not buying the prestige, it was buying a corpus to wrap in software.

The Disc

Encarta launched in 1993. The pitch was the multimedia the printed page could not offer: articles hyperlinked to each other, a searchable index, photographs, an interactive atlas, audio clips, and short videos, all on a disc that cost a rounding error to stamp compared with printing and shipping thirty-two bound volumes. It opened at $395, dropped to $99, and was soon bundled free with new Windows PCs, which put it in millions of homes at effectively no marginal cost to the buyer.

The effect on the print industry was fast. Britannica’s sets sales peaked at 120,000 in 1990 and fell to 40,000 a year by 1996. That January the company was sold to the Swiss financier Jacqui Safra at a price well below its estimated value, its door-to-door sales force dismantled. Britannica kept publishing, moved online, and finally stopped printing in March 2012, 244 years after its first edition in 1768; only 8,000 sets of its last print run had sold. Encarta did not do all of this alone (Grolier and others shipped CD-ROM encyclopedias too), but it was the volume leader, the top-selling multimedia encyclopedia through the early 2000s, and the clearest agent of the collapse.

The Free Encyclopedia

Encarta’s own foundation was already eroding as it peaked. Wikipedia launched in January 2001, free to read and open for anyone to edit. By 2008 Encarta Premium held about 62,000 articles, a large number for a curated product shipped on a disc. Wikipedia had passed a million English articles in 2006 and kept growing by the day, covering television characters and small towns that no commissioned editor would ever have been assigned to write.

Encarta could not compete on any axis that now mattered. It cost money; Wikipedia was free. It shipped once a year on a disc; Wikipedia updated the minute news broke. It had 62,000 articles; Wikipedia had millions and a link to everything. Microsoft’s curated quality was real, and it was beside the point, the same way Britannica’s superior depth had been beside the point against a $99 disc a decade earlier. Microsoft announced in March 2009 that it would stop selling Encarta, ended sales in June, and closed the MSN Encarta websites on 31 October 2009 (Japan followed on 31 December).

Dead End

Encarta is the rare product that played both roles in the same story. To Britannica it was the disruptor: cheaper, more convenient, good enough, and backed by a distribution channel (the pre-installed PC) the incumbent could not match. To Wikipedia it was the incumbent: more expensive, less current, smaller, and defending a production model whose costs a free competitor had driven to zero.

Both transitions turned on the same fact. Each generation drove the cost of copying and distributing a body of knowledge closer to nothing, first from bound paper to a pressed disc, then from a disc to a web page anyone could edit. A product optimized for one rung of that ladder had no defense against the next. Microsoft’s encyclopedia lasted sixteen years and helped end an industry that had run for two centuries, and it lost to Wikipedia on exactly the terms by which it had beaten Britannica: price, convenience, and reach.

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