Deal Radar 2009: Edutainment Resources, Inc.

Even as companies such as Google, Microsoft and Nokia develop technologies to “write the future of the web” in Kannada, Russian and Nepali, and scholars question whether English will “retain its pre-eminence”, each year millions of people begin to study what is still the official language of organizations as diverse as the European Central Bank, ASEAN and OPEC. As long as English remains the global langauge of business and science, there will be a need for English as a Second Language (ESL) materials. But the content and delivery of materials must be adapted to 21st-century learners. Honolulu-based Edutainment Resources, Inc. (ERI) is one company that promotes language learning using digital technology and a unique edutainment approach.

ERI develops edutainment resource materials for learning ESL with a goal to develop engaging multimedia materials to motivate learning and enable the use of English globally. With innovative education as its primary goal, Edutainment Resources strives to provide students and teachers with interesting solutions to learn and communicate better.

The company was founded by Lishan Chong (CEO), a native of China, who received her bachelor’s degree in ESL from China and her MBA from the US and has spent over 20 years in foreign affairs and the travel industry. Collaboration with co-founder James Chong (interim CFO), a NYC entrepreneur, investor and Internet technology expert, led to the formation of ERI in 2004. A pilot program addressing content that was educational and entertaining was set up, based on which the PencilBot™ brand was conceived to be delivered via three platforms – DVD, mobile phones and the web. 

ERI has raised $1.8 million to date: a $450,000 seed round in 2003; a $420,000 Series A in 2004; and a $940,000 Series B in 2005. The company is seeking additional investment over the next six to twelve months in order to further product development and market entry.

The PencilBot application integrates language, culture and knowledge, and comprises theme-based, interactive edutainment materials delivered on the iPhone and DVD. Activities are presented in short modules that are visually striking and addictive, making PencilBot™ attractive for ERI’s target 12-25 age group. The design is cost effective, adaptable and extendable. The next target group is the career-oriented 26-45 age group, which is increasingly aware of the need to communicate in languages other than their own. According to Ms. Chong, “ERI’s innovative materials and intensive R&D are paying dividends today, as the need for effective spoken communication becomes paramount and our edutainment approach is increasingly recognized.” 

ERI believes their product differs from others by integrating three strategic elements: a combination of edutainment, learner autonomy and effective use of media, while constantly being learner-centered. PencilBot™ applications for the iPhone cost approximately $5.  

When the company was founded, the ESL market offered products and services from high-priced personal tuition and language laboratories, through expensive and lengthy boxed courses and via locally-produced CD-ROMs and MP3 downloads, many of which were a copy-and-paste version of textbooks. According to the British Council, by 2011, over two billion people worldwide each year will be learning English. At present, over 1.5 billion people learn English every year, spending more than $30 billion on ESL-related goods and services. At launch, ERI addressed the technically savvy 12-25 age group in 25 growth markets, including Western Europe, China, Brazil, Russia, Mexico and Egypt, which amounted to 450 million individuals. Industry analyst MIC (Market Intelligence Center) in Taiwan says that mobile phone penetration within this consumer group is almost 50%, making it close to 220 million subscribers in the selected countries. Assuming only one-third of this demographic learns English, a well-defined market size for PencilBot™ is a conservative 70 million students. 

There are estimated to be over two billion mobile phones in the world; more than 12 times the total number of DVD players. By 2006 there were already ten times more mobile phone subscribers than broadband connections. Because of the implications of this trend, mobile operators worldwide have invested millions of dollars to improve network infrastructure in order to deliver higher quality multimedia content. This is in line with the theory in my recent Forbes column, that there is a strong opportunity to use mobile phones as a platform for socioeconomic development, especially in education.  

While mobiles are an important form of distribution for ERI, since there are over 3,000 handset models worldwide and there is a need to establish partnerships with all the network operators, this form of distribution is not as popular as DVDs, making the DVD market a substantial platform for multimedia content delivery for at least the next four years. 

The introduction of the iPhone created a unified distribution platform available in over 60 countries. The first three PencilBot™ ESL iPhone Apps are available for sale wherever the iPhone has a presence. Since initial responses seem strong, ERI expects this to be an important source of revenue from this year on. Broadband access is also an essential component of ERI’s distribution strategy. 

Packaged media is distributed through strategic partnerships and licensing deals, and the success of PencilBot™ on the iPhone is expected to strengthen demand for the boxed DVD sets. According to research by Futuresource in 2007, the market value of packaged media sales over the next four years is not expected to change much.

Just before ERI launched, they contacted influential bloggers and opinion leaders with offers to sample the product and links to online demo videos. The company sent review copies to opinion leaders and made presentations to licensee partners and at TESOL trade shows and conferences. Comparative trials in schools, active marketing and PR activity all helped the company penetrate the education market. 

ERI is an early company and has not divulged their revenue figures. So far, the company has made available six DVDs with over 15 hours of multimedia content and three of a planned total of 21 iPhone Apps. Licensing agreements are in place with the Beijing Foreign Language A/V Publishing House (BFLAPH) and Digidea.net in China. Another deal is in negotiation with Liqvid, a leading online e-learning company in India that specializes in personalized learning. The company is also exploring a license deal with the Langenscheidt Publishing Group (LPG), a 150-year-old publishing house in Germany specializing in travel and language materials publishing and distribution to Western Europe.

Some of ERI’s major competitors are Rosetta Stone, Auralog and Ellis (Pearson), all of which are very successful companies. Their products are aimed at adult learners who are prepared to acquire a complete course as a single purchase. The drawback to this approach is that learners have to be very self-motivated to buy and use the product effectively, or the drop-out rate is high, because of a rigorous study schedule.

The company plans to expand PencilBot™ to include other subjects, age groups and languages. They also want to develop a community-based, localized after-school program in a global setting, to improve communication skills in a fun environment. ERI is open to a sale or merger with a multinational company in the education field, a media corporation or a digital content giant in the future.

Recommended Reading:
Forbes Column ’08: Edutainment Needs Entrepreneurs
Gen Y and Edutainment
Affluenza

This segment is a part in the series : Deal Radar 2009